More and more homeowners in the United States are choosing to make the switch to solar energy. By installing solar panels on a property, homeowners are able to reduce their energy costs, gain independence from the grid, and play a role in protecting the environment. To date, 130 GW of solar capacity has been installed in the US, with a further 480 GW set to be installed in the coming decade.
While the cost of solar panels has declined by over half in the last 10 years, the upfront cost can still be offputting for many homeowners. That’s where solar energy credits come in. In this blog post, we will highlight everything you need to know about the solar tax credit extension, announced in August 2022, that will help homeowners switching to solar energy save on the upfront installation costs.
What Is the Solar Tax Credit Extension?
The Inflation Reduction Act was signed into law by President Biden earlier this year. This Act accomplishes a number of green initiatives. These include the expansion of the Investment Tax Credit (ITC), also known as the Federal Tax Credit for Solar Photovoltaics.
This includes a number of positive changes for homeowners interested in solar power. For example, it increased the ITC in its amount while its timeline was also extended.
Now, homeowners who invest in solar panels before the end of 2032 will receive a 30% tax credit. This percentage is due to decrease to 26% in 2033 and to 22% the following year.
What’s more, certain storage equipment expenses are now included in the ITC. This means that energy storage devices with a capacity rating of 3-kilowatt hours or greater are included. The bottom line is that homeowners will save, on average, around $7,500 on the upfront costs of switching to solar energy.
Who Is Eligible?
In order to claim the federal solar tax credit, there are certain criteria that must be met. As noted above, a solar system must be installed before December 31, 2034. The solar system must also be located at a property in the US.
Generally, homeowners must own the solar system that they install. This means that they are not leasing the system or paying a solar company to purchase the electricity that the system generates.
The other option is if homeowners purchase an interest in an off-site community solar project. There are restrictions here, including that the electricity generated is credited against and does not exceed a homeowner’s electricity consumption.
Understanding Solar Energy Credits in the US
The US is making a big push toward renewable energies, including solar. The extension of the ITC allows homeowners interested in installing solar panels on their properties to save on the upfront costs.
If you are interested in learning more about solar energy credits and how to go solar, keep reading Wise Money Life. We are here to help consumers make wiser financial decisions through expert advice, unbiased comparisons, and up-to-date news.