With the 2022 tax season upon us, getting the most out of our hard-earned money is a high priority for most of us (I’m not talking to you, Elon…). One of the unexpected surprises hidden in the 2022 Inflation Reduction Act (IRA) was an expansion of existing tax credit opportunities. Specifically, those that promote solar energy. The IRA extends the provisions of the Solar Investment Tax Credit (ITC), so
residential homeowners who install solar panels between January 1, 2022, through the end of 2032 (yes – retroactive to all installs in 2022) will receive a 30% tax credit off the installation cost from their federal income taxes. If homeowners owe less than their solar tax credit amount in federal taxes in the year they install their system, they can carry over any unused credit into the next tax year for as long as the ITC is in effect. After 2032, the residential ITC will start to again phase out to 26% in 2033, 22% in 2034, and will end in 2035. For anyone who had their solar and/or battery system installed in 2022 (which was a record-breaking year for us, so there are many Sky NRG Solar customers in this situation), will be getting the full 30% tax credit, rather than the initially anticipated 26%. Great news indeed!
Another very welcome piece of the ITC is that, for the first time, non-profit organizations are eligible for solar tax credit. Non-profits, which do not pay federal taxes, had historically been disincentivized from switching to solar because they could not capture the value of the solar tax credit. But now, non-profits will receive the same 30% tax break on solar installations via direct payment from the federal government. Houses of worship, schools, fire stations, and public works facilities… these institutions are now able to take advantage of this huge incentive to upgrade to renewable power.
This begs the question – should you postpone your solar investment due to the current economic uncertainty since the ITC is here to stay? Should you wait and see if solar prices will go down? The answer is as complex as the current situation we’re finding ourselves in. The year 2022 was defined by opposing dynamics: persistent supply chain problems and labor shortages plagued the solar industry, while the passage of the IRA strengthened even further the economics of solar projects. But it’s not all blue skies. Significant challenges remain, from global chip shortages, and ongoing labor issues, to inflation and higher energy prices country-wide. Net metering policies remain a central topic of debate and controversy. Utility-backed proposals in several states (California, Florida, Indiana, Idaho, Michigan, and North Carolina) sought to cut net metering compensation rates and/or enact fixed charges for residential customers this past year. It would not be surprising if Virginia’s powerful Dominion lobby, following suit, pursues net metering changes in the near future. If this ever happens, customers who have already installed solar will most assuredly be grandfathered into existing—and highly favorable—net metering rules.
We expect 2023 to be a busy year for us, and the solar industry as a whole. We expect to upgrade more and more homes and businesses that want to combat rising energy prices and inflation, lock into favorable net metering laws, and lower their carbon footprint. If you’re interested in being one of those homeowners, please reach out to us and see what your solar potential can be.