In the summer of 2022, the U.S. Congress passed the most significant piece of legislation for the renewable energy and storage space in almost 20 years. The Inflation Reduction Act includes a $369 billion investment in renewable energy and lays the foundation for a stronger home grown solar and battery industry. Its incentives may surprise you and are more relevant to existing solar owners than you might think.
Investment Tax Credit Now Includes Battery Storage
One of the most significant provisions of the infrastructure law is the long-term extension of the investment tax credit (ITC), which was instrumental in launching the US solar industry.
As a quick reminder, the investment tax credit is a straight credit against your tax liability. This is not to be confused with a tax rebate or tax deduction. Tax credits can be applied against your federal tax liability. To receive a credit, you must complete IRS Form 5695 when you file your taxes and add your renewable energy or battery storage credit information to your typical form 1040. Typically the tax credit is consumed within the first year of applying for the credit, however if your tax liability isn’t large enough it can be rolled over for three years.
The bill calls for a 10-year extension of 30% of the cost of installed equipment to be tax exempt, falling to 26% in 2033, and 22% in 2034. That 30% credit now applies to energy storage, meaning retrofits of batteries to solar arrays can benefit. Existing photovoltaic (PV) solar customers who have been waiting for a battery backup solution to provide power during a utility outage now finally have a significant financial aid program that brings the cost in line with natural gas and propane generators.
The IRA furthers domestic investment in battery and solar by providing a 10% ITC for battery and solar equipment made in the USA. Check with TerraSol to find out what products are eligible for this additional 10% tax credit.
Inclusion of Non-Profits in Federal Solar Incentives
Traditionally non-profits including charities and voluntary groups, educational and religious organizations, community programs, and some public organizations, have been excluded from reaping the benefits of tax credits and other renewable energy funding at the federal level. However, with the passing of the IRA, non-profit organizations will get to participate in the 30% investment tax credit to take what is called “direct pay” for the value of the tax credit. Because of their tax-exempt status, non-profits could not apply for the predecessor investment tax credit for solar systems. Now non-profits and non-tax entities can get paid the equivalent amount of the tax credit, no longer missing out on this huge financial aid to get a solar + battery project started.
Improvements to the ITC at your Workplace
The IRA bill is also aiming at helping improve solar and battery solutions in the commercial sector. Businesses are now eligible for more federal tax incentives, increases in federal grants like the Rural Energy for America Program (REAP), and financing vehicles Commercial Property Assessed Clean Energy (C-PACE) to make solar and battery investments a no-brainer. Connect with TerraSol to see if we can help your business take advantage of these incentives.