With the passing of the Inflation Reduction Act, many families wonder how exactly the money included in this legislation can help them. Several new incentive programs could help families greatly if they are willing to change how they use energy and make changes to their homes to make it easier to capture renewable energy.
This quick guide will help you better understand the Solar Tax Incentives included in the Inflation Reduction Act and the tax credits for residential solar and battery storage systems.
What Does Solar Energy Have To Do With Reducing Inflation?
Although at first glance you may not automatically see the connection, the truth is that making progressive steps toward more renewable energy accessibility can help Americans in the long run who are struggling to keep their budgets balanced.
Renewable energy is safer and cheaper in the long run. Families willing to get on board with clean energy innovations will see big money savings in the future. This can help them cope with changes in prices.
Solar Panel Tax Incentives
One of the biggest tax incentives included in the legislation is those offered to families and businesses willing to install solar panels and energy storage on their properties. The existing tax incentives will be beefed up for those installing residential solar, and more money is being offered for those who choose to install storage systems. These solar storage systems act as giant batteries to effectively store the energy that is collected during the day.
When a structure uses solar panels and storage units, it can decrease the amount of draw it puts on the electric grid. The draw can be extreme during peak times. This strengthens the effectiveness of the grid for everyone.
You could get up to 30% back of your investment during tax season. This incentive will be retroactive to the beginning of 2022.
Other Incentives Worth Noting
Tax incentives for electric appliances are also being offered. Families who opt to replace older appliances with newer energy-efficient models can expect a tax credit for these purchases.
Other energy-saving improvements, such as installing energy-efficient windows and doors, can also garner sizable tax credits.
There are also electric vehicle tax credits that can be earned for those who are investing in electric cars. The language of the legislation, however, excludes many models of vehicles. You will need to talk with your tax professional to fully understand the details of this particular incentive program.
Things To Consider
Many tax credits and incentives have an income cap attached to them. This means that very high-income individuals may not be able to claim the full credit or claim the credit at all. The Inflation Reduction Act and its many parts are aimed primarily at low to middle-income families. The motive is specifically to benefit this demographic.