What Does the Inflation Reduction Act Do for Solar Energy?

The Inflation Reduction Act of 2022 has recently been signed into law, which is great news for the solar industry. This historic piece of legislation is a massive tax, healthcare, and climate bill that will have major implications for upcoming residential, commercial, and utility-scale solar energy installations for years to come.

The official bill is 730 pages long and covers a wide range of topics. Today, we’re going to cover a few of the highlights and explain how the Inflation Reduction Act (IRA) will impact solar panel installation for homeowners.

The Largest Clean Energy Investment in US History

The Inflation Reduction Act is a huge win for climate reform. A major portion of the $750 billion dollar bill—about $370 billion— is to be allocated to clean energy and combating climate change. The provisions set forth in the IRA will create and extend clean energy and energy efficiency tax credits, create new tax credits for electric vehicles, allow for greater carbon management and carbon capture, increase innovation around clean energy technologies, and much more.

With the implementation of the Inflation Reduction Act of 2022, the United States will be on track to reduce carbon emissions by 31-44% by 2030—when compared to 2005 levels.

Better Tax Credits for Solar Panels & Battery Storage

There are a lot of good things to say about the Inflation Reduction Act and solar panels. The bill will make solar panel and battery storage installation more affordable for homeowners and businesses, and it will also spur more utility-scale projects, leading to a cleaner, more reliable electric grid.

One of the most important components of the bill is the increase and extension of the solar Investment Tax Credit (ITC). Prior to the IRA passing, the 2022 federal solar tax credit allowed homeowners to reduce their federal tax liability by 26% of their solar installation costs. It was set to be reduced in 2023 and eliminated entirely in 2024. Now, that’s all changed for the better.

Here’s what you need to know about the Inflation Reduction Act and the solar tax credit:

The federal solar tax credit has been increased to its full 30% value for residential, commercial, and utility-scale projects with direct pay for non-profit and government entities.
The federal solar tax credit has been extended for 10 years.
The federal solar tax credit is now transferable and can be transferred or sold to other taxpayers.
Battery storage is included in the credit and, for the first time, standalone battery storage that is not connected to or charged by solar panels also qualifies for the 30% tax credit.

The increased ITC retroactively applies to solar installations in 2022. If you installed solar this year and were planning to claim the solar panel federal tax credit for 2022, you will now qualify for the higher 30% credit instead.

There’s Never Been a Better Time to Go Solar

SouthFace Solar & Electric is a leading solar provider near you in Arizona, and we can help you take advantage of the solar tax credits set forth in the Inflation Reduction Act. We’ll put the power back in your hands with an off-grid solar energy system and can help you get the most out of tax credits and incentives for an affordable installation.

We want to help you maximize your investment in solar energy so that you can enjoy 25+ years of lower energy costs, clean energy production, and greater energy independence. We know how to leverage tax credits and incentive programs to help you reduce your installation costs and save as much as possible throughout the lifespan of your solar system.