After years of promises and negotiations, Congress finally passed the Inflation Reduction Act of 2022 (IRA) which, among other things, give an increase and extension to the Investment Tax Credit (ITC) for homeowners. President Biden quickly signed the bill, so what does this new Act mean for you?
First, if you already installed a solar energy system in 2022 thinking you would get a 26% ITC off of your taxes – good news for you! That credit has now increased to 30%! There is nothing you need to do. The IRA retroactively increase the tax credit, and when you file your taxes next year, you can potentially receive a 30% credit instead of the 26% credit.
One of the items the Solar Industry was hoping would be included in the Act was the so-called Direct Payment Option. This would have allowed the payment of the 30% ITC regardless of the homeowner having a Federal Tax obligation. Unfortunately this option was not included in the final draft so only those homeowners who have a Federal Tax liability equal to or greater than the ITC will be able to take the entire benefit in the first year.
However, the 30% ITC is now fixed for the next 10 years, so the uncertainty about the ITC continuing beyond 2023 is now resolved. The ITC is here to stay for the next 10 years, and you will see an huge increase in the number of solar panels – both residential and commercial, over the next decade.
I’ll talk more about the commercial solar benefits in my next post, but please let me know if you have any questions on the impact of the IRA as you consider solar energy for your home.
Steve
