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The Inflation Reduction Act solar tax credit is an excellent incentive for homeowners who are thinking about going solar. It allows you to reduce what you owe in federal income tax by 30% of your solar installation costs. For most homeowners, this translates into thousands of dollars in savings!
If you’re considering installing solar panels in the Phoenix, Arizona area, you don’t want to miss out on this lucrative solar incentive. Today, we’re answering some of the most common questions about the IRA solar tax credit so you can take advantage of federal rebates and incentives for your solar installation.
What Is the Inflation Reduction Act Solar Tax Credit?
The Inflation Reduction Act solar tax credit is an expansion of the Investment Tax Credit (ITC), which has been in place for many years but was set to expire in 2024. When the Inflation Reduction Act was signed in August of 2022, it created a 10-year extension of the ITC and increased its value from 26 percent to 30 percent.
How Does the Inflation Reduction Act Solar Tax Credit Work?
The solar tax credit (also known as the Investment Tax Credit or ITC) allows you to reduce what you owe in federal income tax by a percentage of your solar installation costs. It is a dollar-for-dollar reduction, which means if you have a $5,000 credit, you can reduce your tax liability by $5,000. And if there is any savings leftover, you can roll it over for one more year!
How Much Is the Solar Tax Credit Worth in 2023?
The solar tax credit in 2023 is worth 30% of your solar installation costs. The 30% solar tax credit is available for solar installations completed from 2022-2032. The tax credit will be reduced to 26% for solar systems that are installed in 2033 and to 22% for systems installed in 2034. In 2035, the solar panel tax credit will expire, unless another extension is granted.
What Expenses are Included in the Solar Tax Credit?
Almost all of the expenses associated with a solar installation are eligible for the federal solar tax credit, including:
Solar panels
Solar inverters
Solar racking
Solar batteries (must have a capacity rating of 3 kilowatt-hours or greater)
Installation costs
Permitting and inspection fees
All types of solar systems are eligible for the tax credit, including commercial solar, grid-tied solar, off-grid solar, and ground-mounted solar.
How Do You Qualify for the Inflation Reduction Act Solar Tax Credit?
It’s easy to qualify for the federal solar tax credit, and most homeowners are eligible. To claim the residential solar tax credit, you must:
Own your solar energy system (financed systems qualify but leases do not).
Install your solar system at a residence that you own in the United States.
Have taxable income.
Install a new solar energy system that is being used for the first time.
To qualify for the credit in a given tax year, your system must be fully installed and turned on by the last day of the year. So, if you want to claim the ITC on your 2023 taxes, your solar energy system must be up and running by December 31, 2023.
Can the Solar Tax Credit Be Rolled Over?
Yes! If you are eligible for a credit that is worth more than what you owe in taxes, the remainder can be rolled over to the following year.
Do Solar Batteries Qualify for the Federal Solar Tax Credit?
The new Inflation Reduction Act solar tax credit includes energy storage systems. Solar batteries must have a capacity rating of 3 kilowatt-hours or greater in order to qualify for the credit. The Inflation Reduction Act has also made standalone battery storage eligible for the ITC for the first time, which means you can receive the credit for solar batteries that are not connected to a solar panel system.
Get the Best Arizona Solar Incentives When You Go Solar Now with Energy Solution Providers
Energy Solution Providers is a leading solar company in AZ. We can help you take advantage of the federal solar tax credit and other Arizona solar incentives in 2023, like the APS battery incentive program, to make your home solar installation as affordable as possible.
We have over 20 years of experience installing solar in Phoenix, Peoria, Carefree, Scottsdale, and the surrounding communities, and we make going solar simple with customized designs and a streamlined installation process. We’ve completed more than 1,400 solar projects and are the company to call for high-quality solar panels in Arizona.