Everything You Need to Know about the Inflation Reduction Act

Tax season is right around the corner! So if you’ve just installed solar panels with us, or are thinking about solar for your home, Momentum Solar has the breakdown on everything you need to know about the Inflation Reduction Act.

The Inflation Reduction Act (IRA) is a United States federal tax incentive and is one of the most significant energy public investment proposals in history. Set to boost the economy for working-class families, the IRA aims to tackle the climate crisis by expanding targeted tax incentives that promote clean energy technologies such as batteries and solar [2]. 

Through the IRA, the Biden administration extended the Investment Tax Credit (ITC) through 2025 [3]. With this, comes many benefits to the solar industry as a whole with a five-year growth outlook increasing by 40% [1].

Thinking about if solar panels are right for your home? Click the “Free Quote” button on the top of the page for more information or call 1-888-MOMENTUM to talk to a local sales representative!

What is the Investment Tax Credit?

The Solar Investment Tax Credit (ITC) is a federal tax credit that supports the growth of solar energy in the U.S. It was enacted in 2006, and since then, the U.S. solar industry has grown more than 200%. With the government investing in clean energy, the ITC has created hundreds of thousands of jobs and invested billions of dollars in the economy [4].

The ITC is a tax credit provided by the federal government to individuals installing solar panels on their residential property [4]. You can claim the ITC for the tax year that your solar panels were installed. In August 2022, when the IRA was passed, the ITC raised its credit from 26% to 30% [3]. 

Let’s take a step back for a minute. What even is a tax credit? How do I claim it? 

“​​A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe” [3].

The tax credit provides a refund on your federal income tax for a percentage of the cost of your solar system [3]. To claim the ITC on your federal income tax for 2022, you need to fill out Form 5695 for the Internal Revenue Service [5]. As always, make sure to do your own research or talk to a tax expert or accountant when filing your taxes. For even more information, visit our previous blog here.

Am I eligible for the ITC?

Here are the eligibility requirements for the ITC, according to information from energy.gov [3]:

• Your solar system was installed and placed in service before December 31, 2034
• Your solar system is located at a residence belonging to you in the U.S.
• Must own the system either through financing or cash purchase

How does the IRA affect someone with solar?

Residential solar has been record-breaking all around. Even amid supply-chain constraints and permit delays, residential solar installations have been increasing with 23,000 in Q3 of 2022 alone [1]. For more information on residential solar’s 2022 performance, visit our latest blog, The Solar Revolution in the US.

The IRA helps homeowners across America take advantage of the ITC. With its expansion, you can now get reimbursed for your installation costs even more. Not only is this credit assisting homeowners in saving tons of money, but it’s also helping the environment by fostering a cleaner future.

The ITC isn’t the only governmental financial incentive. Several state governments have their own tax incentives and net metering opportunities offered to local homeowners. You can find more information by checking out our coverage areas page and clicking on your state. If you’re a homeowner in the Northeast, you can visit our recent blog here for state-specific information.

If you’re a Momentum Solar customer from 2022, now is the time to get started on your tax returns as April 18 is just around the corner! If you’re thinking about solar for 2023, keep in mind the ITC is a great way to cut costs. Need some help deciding if solar is right for you? Visit our blog, Looking Toward the Future of Solar to get the low-down on solar in 2023.

Ready to get some panels on your roof? Click the “Free Quote” button on the top of the page or call us at 1-888-MOMENTUM!

 

 

 

 

Citations:

[1] https://www.woodmac.com/news/opinion/the-us-solar-industry-waits/

[2] https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/19/fact-sheet-the-inflation-reduction-act-supports-workers-and-families/ 

[3] https://www.energy.gov/eere/solar/articles/federal-solar-tax-credit-resources 

[4] https://www.seia.org/initiatives/solar-investment-tax-credit-itc 

[5] https://www.irs.gov/forms-pubs/about-form-5695