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As the government changes and new policies are signed or cast aside, it can be hard to know what solar subsidies are still in place and what has changed.
In the past, solar subsidies were due to decrease from 26% to 22% in 2023 and then become 0% in 2024, but the good news is that this has changed.
What Changes Have Been Made to the Federal Solar Subsidies?
Thanks to a bill signed and passed by Senate Democrats, solar subsidies have not only been increased, but also prolonged. With the Inflation Reduction Act, solar subsidies and incentives have been extended for the next 10 years!
With this bill, federal solar tax credits have been increased from 26% to 30% and are here to stay until 2032. You can claim this amount any year until 2033, when the credit will drop back down to 26% in 2033 and 22% in 2034.
The bill isn’t limited to just solar panels, either. It includes battery storage and allows for retroactive tax credit, so new solar energy owners can benefit from the 30% credit on solar energy sources that were installed in 2022, even if it was before August 16 when the bill was signed.
How Does the New Federal Solar Subsidy Work?
This new law works similarly to the original one. If you’ve installed solar energy in 2022, you can benefit from the 30% tax credit right away. The solar subsidy will not mean you get a check for 30% of the cost, but it will be used to cover any taxes you do owe.
Here’s an example:
Say you owe $7,000 in federal taxes, but you installed solar earlier this year. If your solar installation cost $15,000, then you can claim $4,500 in tax credit. That tax credit will be used to pay the $7,000 you owe, meaning that you’ll end up paying only $2,500 in taxes for the year.
If the amount you owe is less than the subsidy, then the excess can be carried over into the next year. In this case, you may only owe $3,500 in taxes. You can cover all of it with the $4,500 tax credit you received and use the remaining $1,000 to cover some of next year’s taxes.
None of the subsidies can be used as a tax refund or be taken out as cash, so for homeowners who owe less than the subsidy every year, you won’t get as much out of it. This being said, that does not make the new subsidy useless. With it, you essentially won’t have to pay taxes until the subsidy expires in 2035.
Why Is This New Bill Important?
The new bill includes $360 billion for renewable energy and measures to counteract climate change. With it, hundreds of thousands of new jobs have been created, making renewable energy affordable and helping people find employment.
The tax credit also provides those in low to moderate-income areas with a boost to install solar energy. This makes solar much more affordable and will encourage more people to make the switch, further helping to reduce the country’s greenhouse gas emissions and making it a more climate-friendly country.
Conclusion
The new solar subsidy bill has greatly improved homeowners’ ability to install solar. While the funding cannot be used as a tax refund or as cash out, it will reduce the burden of annual taxes for many communities. With solar becoming much more affordable, call our solar panel installers Port Saint Lucie to ask about installing your own solar panels!