The recently signed Inflation Reduction Act included a lot of green provisions. We have been talking about them all month, so if you missed a previous one, just go to our website to listen to them. Today I want to talk about the residential clean energy credits that a homeowner can get by installing solar onto their home.
UNLIKE LAST WEEK WHEN WE TALKED ABOUT REBATES, THIS IS ONCE AGAIN A TAX CREDIT, RIGHT?
Yes, these credits can be up to 30% of the costs of the projects.
HOW DOES THE CREDIT WORK?
A homeowner can install solar heating, electricity generation and other solar home products and receive a tax credit. The tax credit is based in the cost of the product, plus any installation costs or other costs associated with the project.
WHO CAN GET THE CREDIT?
Homeowners can get the credit on their primary or secondary homes as long as the homes are in the United States.
There also is no income limits, so anyone can get the credit.
WHEN DOES THE PURCHASE HAVE TO BE MADE?
That is the nice thing, since the credit is available for 10 years, so the improvements can be made any time through 2032. After that point, the credit is still available, but the percentage decreases.
IS THERE A LIMITATION HOW MUCH A HOMEOWNER CAN SPEND?
There is not, so you can spend $10k or $100k and still get the 30% rebate. The only limitation is that the credit is not refundable, so it is limited to the amount of tax that you have. The credit does carry forward, so it is not lost.
HOW DOES THIS WORK IF THEIR STATE ALSO HAS A TAX CREDIT?
For federal purposes, a state credit does not reduce the federal credit. But you will need to check with the state to see how this federal credit will impact the state credits.
Be sure to talk to one of our professionals if you have any questions about residential solar power credits.