Federal Solar Tax Credit Changes

Solar energy will take off with the federal solar tax credit increase from the Inflation Reduction Act. The tax credit was previously 26% for the year 2022, 22% for the year 2023, and 0% for the year 2024 (10% for commercial ). With much support for clean energy in the Inflation Reduction Act, solar and batteries saw a huge win for the next decade, and homeowners and businesses will be the beneficiaries.

The solar tax credit was once 30% in 2019 and year before but fell to 26% in 2020-2022. Many homeowners and businesses saw a 1-2 year delay in payback due to savings decreasing. Many solar installers say a reduction in overall solar adoption and battery adoption led them to cut jobs and instability. The overall market competition also fell since some installers went under and could no longer compete in the market. Simultaneously, the pandemic hit the world, and many logistical and inventory issues increased solar prices. The industry saw an average of 15-25% increase in overall cost due to those factors. Although the price increased, people still acquired solar due to instability and foreseeable electric grid blackouts.

Solar Tax Credit Increase for Solar Installs Only

The Inflation Reduction Act is going to change the solar game with the new rules. The 10 year extension and increase to 30% marks a big win for solar adopters as more savings are available up front. This timeline increase makes the cost of going solar plus battery a lot easier for homeowners and businesses and reduce the overall initial cost.

Battery Only Install Qualifies for the 30% Federal Tax Credit

The unexpected updates is also now that battery systems qualify for the tax credit by themselves! This is huge because previously, the solar gave the battery the ability to qualify for the tax credit. The typical solar system is an average of $15,000 before any incentives and a lot of homes did not qualify for solar due to shading or other roadblocks. Now people can back up homes and businesses without panels and enjoy protection. This opening in the market will lead to greater adoption of backup power that is not from fossil fuels. Maybe Tesla will now add the ability for their batteries to recharge with the grid.

2022 Solar + Battery Installs are Eligible for the 30% Tax Credit

The last big change is now solar systems and batteries installed and activated in 2022 qualify for the 30% tax credit as well. This means homeowners and businesses who anticipated a 26% tax credit are eligible for the new 30% total. This 4% could mean hundreds and or thousands depending on their project. These extra savings can potentially now go to additional energy-saving purchases.

 The next decade is set to grow the solar industry to levels even higher of today. The following issues to tackle will be to enact nationwide net metering, state incentives, more financing options for low and middle-income households, and expedited permits. A strong labor force is also needed to help power the grid of the future, so job training and investment will be required here as well.

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