If you’ve been following the news over the past few months, you’ve probably heard about the Inflation Reduction Act (IRA). The IRA covers a lot of ground, from tax law and healthcare to clean energy and climate change. But the aspect of the IRA that we’re most interested in is the expansion of the solar Investment Tax Credit (ITC). The ITC, also known as the federal solar tax credit, makes solar panel installation significantly more affordable for homeowners and businesses.
Keep reading to learn more about the Inflation Reduction Act and solar panels and find out how you can get tax breaks when you go solar.
Before the IRA was signed into law, the federal solar tax credit was on its way out. It was set to expire for residential solar in 2024 and be reduced to a 10% credit for commercial solar from 2024 on. Now, the full 30% credit will be in effect for both residential and commercial solar installations until 2032. After that, it will be reduced twice before expiring for residential solar. The new federal solar tax credit schedule is:
If you installed a solar energy system in 2022 and were planning to claim the 26% federal solar tax credit, you’re in luck. The new 30% federal tax credit is retroactive to the start of 2022, so you can claim the higher credit instead.
The 30% federal solar tax credit applies to battery storage, whether it’s attached to a solar energy system or installed as a standalone energy storage device. If you already have solar panels installed at your home or business and want to add battery storage, you can claim the credit for your battery installation.
