The Inflation Reduction Act of 2022 has been officially signed into law. This new piece of legislation was designed to address inflation and includes major spending on healthcare and climate reform.
There’s a lot of excitement around this historic bill and you’ve probably been hearing about it for the past few weeks. But what’s in the Inflation Reduction Act (IRA), and how will it affect you?
Today, we’re going to break down some key components of the IRA, what it means for the environment, and how it will affect solar panel installations in California and across the country.
What Is the Inflation Reduction Act?
The Inflation Reduction Act is a massive tax, healthcare, and climate bill that addresses some of the most crucial issues Americans are currently facing, including inflation, prescription drug costs, and climate change. Highlights of the bill include the implementation of a 15% minimum tax on corporations that are making over $1 billion, an expansion of the Affordable Care Act, new provisions that allow Medicare to negotiate with pharmaceutical companies on the cost of certain prescription drugs, and the creation of over 9 million jobs.
Some of the most impactful provisions in the bill, however, are related to climate and energy.
The Greatest Effort to Tackle Climate Change in US History
The Inflation Reduction Act is the largest investment the United States has ever made in climate reform. Nearly $370 billion of the $750 billion dollar bill will be allocated to clean energy and climate-related provisions, including:
- Clean energy tax credits
- Carbon management tactics
- Residential energy efficiency tax credits and incentives
- Greater clean energy innovation
- Offshore wind development
The Inflation Reduction Act Increases & Extends the Solar Investment Tax Credit
The Investment Tax Credit (ITC) has long been the most lucrative solar incentive available in the United States and has drastically expanded access to residential and commercial solar energy projects. The federal solar tax credit allows homeowners and businesses to reduce their federal tax liability by a percentage of their solar panel installation costs, making solar installation more affordable.
The tax credit has always been on a step-down schedule. It was initially a 30% credit, but the federal solar tax credit in 2022 was reduced to 26 percent. It was then set to be reduced again in 2023 and eliminated for residential solar in 2024.
The Inflation Reduction Act changes things. Here’s what’s happening with the Inflation Reduction Act and the solar tax credit:
- The ITC has now been increased from 26 to 30 percent.
- The ITC has been extended for 10 years at the 30% value.
- Solar batteries that are connected to a solar panel system continue to qualify.
- Standalone batteries that are not connected to or powered by solar now qualify for the ITC.
- The 30% credit is retroactive and can be applied to solar systems that were installed in 2022.
Premo Solar Can Help You Take Advantage of the New 30% Solar Tax Credit
Premo Solar gives California homeowners and businesses a premium solar experience with industry-best solar products, custom system designs, professional installations, and exceptional customer service. We can help you get the most out of your investment in a solar panel installation with the 30% federal solar tax credit and additional solar incentives available to California solar owners. If you’re looking for an experienced solar installer near you in Monterey, Salinas, or Santa Cruz, give Premo Solar a call. We’re here to answer your questions and help you take the first step toward energy independence.