Why The 30% Tax Credit Just Changed the Solar Industry
By: Eric Huesca, SEO Content Writer
October 20, 2022
With global warming on the rise, it is crucial that we all come together as a society to invest in green energy. Temperatures have been increasing year after year. This is why we don’t have much time to wait around. Fortunately, the solar industry had a huge win recently on August 16th, 2022 when President Biden signed the Inflation Reduction Act into law. Climate activists across the country have been celebrating since. This legislation would act as the stepping stone for the United State as it would help combat climate change in the best way possible. It aims to reduce climate change-causing pollution by 2030 by half and it also reinstates the previously granted solar panel tax credit rate of 30% for the coming ten years from 2022.
Ground mount solar panel arrays
The solar tax credit 2022 is great news for anyone who wants to install solar panels or upgrade their energy storage in the coming years. Although the solar tax credit was expected to come to an end by 2024, the government has finally proven that it is committed to creating a better future. Now, you must be wondering how the 2022 solar tax credit works and if you can even get a tax credit for solar panels. As the bill is quite lengthy, there are plenty of details that need to be considered. Here is everything you need to know about it so that you can plan accordingly.
10 Years of 30% Tax Credit
The solar industry had seen solar panel tax credit decrease over the past few years. Initially, the tax credit was about 30% until 2019. However, it decreased to 26% in early 2022 and was later anticipated to drop to just 22% in early 2021. But, the 26% rate had been extended to late 2022 due to the coronavirus pandemic. It was later expected to decrease to 22% again by January 1st, 2023, and the tax credit was previously scheduled to be slashed entirely by 2024 for residential solar installations.
With the introduction of the Inflation Reduction Act, the previously scheduled slash will no longer become a reality. Instead, the 2022 solar tax credit reinstates the initial 30% tax credit which will now live until 2032 following the 10-year extension for residential installations. In fact, the federal tax credits for solar panels have been rebranded as residential clean energy credits. The new tax credit rate applies to solar and battery systems that have been installed from January 1st, 2022 onwards. By 2033, the tax credit would phase out and be removed once 2035 comes to an end. To help you make sense of the solar tax credit 2022, here’s what you need to know.
- The tax credit rate will remain at 30% from January 1st, 2022 to December 31st, 2032.
- From January 1st, 2033 to December 31st, 2033, the tax credit rate will be 30%.
- From January 1st, 2035 onwards, the tax credit rate will be 0%. This means that homeowners would no longer be able to avail of any tax credit.
As you can see from the above, homeowners will get to take advantage of huge savings when they switch to solar. This is why it should be clear that this is the time to go solar. The fact that residential property owners can claim a 30% solar tax credit for up to 10 years is something that you cannot afford to ignore
Homeowners Win
The Inflation Reduction Act is a massive win for homeowners across the country. If you are a homeowner, you can benefit from this increase in tax credit. In fact, now is the perfect time to switch to solar as the path has been made a whole lot easier thanks to the government’s incentive. Prior to the signing of the act, homeowners could only get a tax credit for batteries when the charging had been sourced from a tax credit-qualifying energy source like solar power or wind. What the Inflation Reduction Act does is that it reinstates the 30% solar tax credit from January 1st, 2023 for batteries that have a minimum capacity of 5 kWh regardless of what the energy source might be. Anyone who has purchased a battery that has been connected to solar on or after January 1st, 2022 can take advantage of the solar tax credit.
In addition to solar and energy storage, the law includes rebates for upgrading home appliances. The details of the program are under development and are expected to roll out by 2023. As long as homeowners don’t exceed 1.5 times the medium income of their neighborhood as calculated by the Department of Housing and Urban Development, they can get up to $14,000 in rebates. These rebates would be able available through September 30th, 2031.
The IRA even offers upfront rebates of around $8,000 for installing heat pumps that cool and heat your property. On top of this, homeowners can get a rebate for heat pump water heaters for about $1,750. Other rebates include $840 for offsetting the cost of an electric stove or heat-pump clothes dryer, a $4,00 rebate for electrical panel upgrades, and a $1,600 rebate for insulation that is energy-efficient.
Solar Companies Thrive
One of the best things to happen to solar companies is the Inflation Reduction Act. As homeowners get to benefit from a 30% solar tax credit for the coming 10 years, the demand for solar panels is expected to rise exponentially. This is great news for solar companies as they will get to sell more solar panels and generate higher revenue and profits.
Solar companies can expect unprecedented growth until 2034. Even new startups will see an increase in demand which would result in better profitability. There is tremendous potential for growth in the coming years. Hence, every company will get to benefit from the law. Also, an increase in investment in the solar power sector is expected in order to cater to the surge in demand for solar panels. The bill covers $370 billion for investment in renewable energy. It will be powering the solar energy sector. The extension of the investment tax credit will play a huge role in taking the solar industry in the United States to the next level. It will encourage new players to emerge.
What About Solar Tech
Solar companies can expect unprecedented growth until 2034. Even new startups will see an increase in demand which would result in better profitability. There is tremendous potential for growth in the coming years. Hence, every company will get to benefit from the law. Also, an increase in investment in the solar power sector is expected in order to cater to the surge in demand for solar panels. The bill covers $370 billion for investment in renewable energy. It will be powering the solar energy sector. The extension of the investment tax credit will play a huge role in taking the solar industry in the United States to the next level. It will encourage new players to emerge.
Solar tech is only expected to improve in the coming years. Towards the end of 2034, we will be seeing unprecedented advancements. As more companies join the industry and as the government continues to invest in it, solar tech will get better with time. Everyone is going to benefit from the technology and it will only cement the United States as a solar energy leader. Therefore, the upcoming developments will paint a better future for the country and the world at large.
The long-term incentives will create thousands of jobs and power American energy leadership. The opportunity presented by the act will not be missed and companies will collaborate to lead a green future. Solar tech development had been abysmal in the past. However, that is about to change in the coming years. The tax credit rate is significant and will harness the full potential of the industry. Therefore, solar tech will undergo development.
Now Is the Best Time to Go Solar
The tax incentive provides homeowners and solar companies with the opportunity to grow and take on a great challenge. Anyone who has installed solar and battery systems from January 1st, 2022 onwards or plans to do so until 2032 can expect to avail 30% solar tax credit. The savings are enough to convince just about everyone to invest in solar panels.
Even if you have been skeptical in the past, now is the time to go big or go home. After all, you need to understand that your actions today could help create a cleaner and greener future. By investing in sustainable energy, you will save thousands of dollars and make a difference. The truth is that it has never been easier to go solar ever since the 30% solar tax credit was extended by the government. Therefore, all you have to do is choose a solar company and get started. Besides, the rise in energy prices shows just how important it is to install solar panels on your property.
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Solgen Power is a solar energy contractor that sells and installs solar for homeowners. Solgen Power has been recognized by INC. 5000 as one of the fastest growing companies in the nation. Solgen Power has grown nationwide and continues to provide excellent customer service to homeowners.
