On August 16, 2022, the United States Congress passed the Inflation Reduction Act (IRA), and it was swiftly signed into law by President Joe Biden. The purpose of this Act is to “build an economy that works for working families,” and is aimed at several different aspects of American life. It includes revisions and incentives to healthcare, manufacturing, tax codes, and job creation in clean energy spaces1. The Committee for a Responsible Federal Budget has determined the IRA will reduce deficits by $238 billion2.
Blue Raven Solar is excited and celebrates the IRA’s effect on solar tax credits. As presented on our website, the federal tax credit has increased from 26% to 30% and has been extended for 10 years. It also now includes a 30% credit for energy storage systems. The credit was originally planned to decrease and phase out by 2024, so this is a huge win for clean energy.
While the tax credit update is one of the main clean energy-related changes affecting solar owners directly, there are a few more pieces of the Act related to the clean energy industry as a whole:
Reducing Carbon Emissions
Through these tax credits, carbon emissions are expected to reduce nearly 40% by 20303 and energy bills to reduce by about $500 per year on average4. Not only is solar energy credited higher, but so are electric vehicles and nuclear power investments. Investments were made to several different departments and organizations including the Department of Energy, the Federal Energy Regulatory Commission, and the Interior Department to assist with permitting processes and workforce development.
To tackle environmental injustice, solar and wind installed to benefit low-income communities have increased incentives4. Credit rates are expected to increase between 10-20% based on the approved capacity and financial benefit.
Carbon oxide sequestering credits were also updated, lowering requirements for credits to be obtained. Existing nuclear power plants with zero emissions can now receive credits of .3 cents/kilowatt hour, with the ability to increase to 1.5 cents/kilowatt hour if certain wage requirements are met.
More credits have been put in place for clean fuel production for biodiesel, renewable diesel, alternative fuels, aviation fuels, and clean hydrogen.
For Individuals
An exciting prospect for homeowners is the new tax credit available for energy efficiency improvements made around the house. While there are a few limitations, qualified efficiency improvements such as new windows and heating/cooling systems are now eligible for annual tax credits equal to 30% of the amount paid. This is an excellent companion to the 30% credit for going solar and can provide even more savings to homeowners and cleaner air for the planet.
The Energy Efficient Home Credit is also extended to 2032. This increases the credit amounts for homeowners who meet the Energy Start Single-Family New Homes National Program Requirements or the most recent requirements of $2,500. Additionally, homes that are certified zero-energy homes can receive a $5,000 credit. Multifamily homes can receive a $500 credit and a $1,000 in the same respect. A bonus credit is available for certain prevailing wage requirements.
Clean Energy Vehicles
New electric vehicles (EVs) are eligible for a credit of up to $7,500 depending on a few factors, such as the location of extracting, manufacturing, or assembling of critical materials in the batteries. The final assembly must occur within North America. Credit amounts are subject to change and are available for qualified previously owned vehicles and commercial vehicles depending on the age and value5.
Additional Funding
The IRA ensures funds will be allocated to the proper departments for the certification of applications for credits through the creation of a new program from the Treasury Department. The Hazardous Substance Superfund Financing Rate on crude oil and important petroleum products has increased from 9.7 cents/barrel to 16.4 cents/barrel and is subject to adjustment based on the rate of inflation.
Credits are now available for investing in clean energy and a new emissions-based production for clean electricity technologies, and a permanent extension of a higher tax rate for surface and underground coal mines.
The Future of Energy
With the investments and extensions of the IRA, renewable energy is the future. Solar energy is the cleanest energy source for homeowners to take advantage of, especially with these federal incentives and tax credits now available.
Blue Raven Solar is proud to be a leader in residential solar energy installation and have a team dedicated to helping homeowners save money, including applying for and receiving all available tax credits.
Find out how much you can save with Blue Raven Solar today!
Footnotes:
[2] https://www.crfb.org/blogs/whats-inflation-reduction-act
[3] https://www.wilsoncenter.org/article/wilson-center-expert-analysis-inflation-reduction-act
[4] https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf
[5] https://www.jdsupra.com/legalnews/tax-credits-for-electric-vehicles-what-9782797/
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