It’s a great time for solar power and clean energy technology. Earlier this year, the federal government reached an agreement on a bill called the Inflation Reduction Act of 2022. This bill will include $370 billion for climate measures and renewable energy.
One of the best parts of the Inflation Reduction Act is the extension of the Investment Tax Credit which has helped launch the solar power industry. This new bill calls for a 10-year extension at 30% of the cost of the equipment. The level will decrease to 26% in 2033 and 22% in 2034. This tax credit applies to new solar system installations.
The 30% credit is also for energy storage systems installed with a solar array or as a standalone. This allows the addition of a battery system to an existing solar array.
Energy Efficient Home Improvement Credit
Changes have been made to the Nonbusiness Energy Property Credit. It’s now called the Energy Efficient Home Improvement Credit and will go into effect at the beginning of 2023. The former credit was 10% of the cost of the installation of energy-saving improvements like insulation, doors, windows, and roofing. The former $500-lifetime limitation will still apply for the remaining months of 2022.
Starting in 2023, there will be a $1200 annual tax credit that will replace the $500-lifetime limit. The new tax credit will be 30% of the cost for eligible home upgrades made during the year. It will also include provisions for home energy audits, biomass stoves, boilers, and electric panels.
Residential Clean Energy Credit
The former Residential Energy Efficient Property Credit which is now called the Residential Clean Energy Credit will now be extended through 2034. The credit amount granted for installing solar power, wind, or geothermal has been raised from 26% to 30%. This will continue for the next 10 years until 2032. It will then fall back to 26% and then 22% by 2034. An important point here is that both the residential and business investment tax credits for solar power systems are back to 30% for any solar array installed after January 2022.
The Inflation Reduction Act
There will be incentives and tax credits for energy-efficient appliances and upgrades. The act will revive the credit that ended last year and make it retroactive for 2022 and continue through the next decade. Homeowners who pay for the cost of energy-efficient improvements will be able to claim as much as $1200 per year or 30% of the total cost at tax time. This will include new windows, doors, and energy-efficient appliances.
In the future, the bill will allot $8 billion for two rebate programs. These will target middle and low-income households. One rebate would offer incentives to replace old appliances with energy-efficient ones. This would include any home upgrades to support the new appliances.
The other rebate aims to cut down on energy wasted in the home. These incentives and rebates will take a bit of time to set up in each state because they will have to apply for the money to set up the systems to support homeowners. But once that part is done, this new bill will allow the rebates to be applied at the time of the sale of any new energy-efficient systems.
The rebate can be looked upon as a discount. All buyers who earn 80% or less than the median income for their area will be able to access the most funds. Those households earning 150% of the area median income will obviously see a smaller benefit. These rebates will include:
- $1,600 for ventilation, insulation, and air sealing
- $2,500 for electric wiring.
- $840 for an electric heat pump, clothes dryer, electric stove, or oven.
- $1,750 for a water heater and heat pump.
- $8,000 for space heating or cooling and for a heat pump.
- $4,000 for a breaker box upgrade.
Once the appliances have been installed, most of the equipment is inexpensive to run. New appliances, unlike the old fossil fuel-powered ones, will be easily switched to be able to run on renewable energy sources such as solar power. This will be a much cleaner and more efficient approach to home energy.
The Act will also generate a second rebate program that will pay households between $2000 and $8000 for undertaking upgrades like air sealing, insulation, and systems with low energy waste.
Funds for residential solar panels and energy storage
For homeowners who want to participate in renewable energy, the Act will increase existing tax credits for residential solar power. It will also offer them the opportunity to acquire energy storage systems. Utilizing these initiatives will reduce a home’s draw on an electrical grid during peak usage times.
Homeowners will be able to get up to 30% of the cost of a solar system at tax time, which will be retroactive back to the start of 2022. This program will run through 2032. This solar tax incentive will also apply to storage systems. The amount will begin to reduce in 2034.
Now is the Time to Make the Switch to Solar and Save
If you’ve been considering switching to solar power and clean renewable energy, now is definitely the time! Reach out to the professionals at Steel City Solar for a free consultation.
Our award-winning team will be happy to answer any questions you may have about the benefits of solar energy. We’ve been partnering with homeowners across Southern Colorado to generate their own power and stabilize their energy bills since 2016. Give us a call today at 719-569-5166 or visit our website.
