Solar Investment Tax Credit

Solar energy use is rising across the U.S., becoming a popular way to reduce your carbon footprint, utilize renewable energy, and save on bills; you can even get a credit to claim on your taxes for installing a solar system in your home.

Keep reading to learn more about the solar investment tax credit incentive, how it changed throughout 2022, and how these tax credits can help increase solar use and installation across the U.S.

What is the Solar Investment Tax Credit Incentive?

The federal government initially implemented the solar investment tax credit incentive in 2006. The incentive encourages homeowners and entities to install solar photovoltaic (PV) systems and use solar power for home and commercial energy needs.

The solar tax credit allows people to claim part of the installation cost on their taxes at the end of the calendar year. This investment tax credit has helped grow the solar industry over 200 times what it was before the tax credit was introduced.

How Has the Incentive Changed in 2022?

A few developments have been made to the tax credit throughout 2022. In August 2022, a law was passed raising the tax credit to a 30% credit for systems installed between 2022-2032.

In previous years, people would be eligible for a 26% tax credit. This increase helps further boost solar use in the U.S. by giving people a higher credit when they have a solar PV system installed.

The investment tax credit has also been expanded to include energy storage devices with 3-kilowatt hours capacity or more. These solar battery backup systems can easily be paired with solar energy collection systems and are eligible for tax credit incentives.

President Biden also signed the Inflation Reduction Act into law in 2022. This law allows direct payment options rather than tax credits for non-taxable entities that install solar PV systems; this expands the range of people and groups eligible for incentives related to solar installation and other clean energy efforts.

How Do Tax Credits Help Increase Solar Use?

Tax credits are a great way to encourage people to implement solar energy in their lives. Using solar energy helps the environment by emitting fewer toxic chemicals into the atmosphere.

Solar panels have about 20 times less carbon footprint than traditional coal energy sources. However, for some people, solar energy can be expensive. A 30% tax credit helps make solar energy more affordable and attainable for more households.