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What’s Happening to the Solar Tax Credit in 2022?
February 7, 2022
Thinking about going solar or geothermal with your Sacramento, Elk Grove, or Rocklin home? You can lower (or even eliminate) your energy bills and power your home with clean, renewable energy. To top it off, you can even gain energy independence and avoid inconvenient planned or unplanned power outages from your local utility.
Upfront installation costs hold many California homeowners back from upgrading, but with solar energy rebates and incentives, it’s never been easier for home and business owners looking to save money and make their home or commercial space better for the environment.
There’s one solar and renewable energy incentive in particular that towers above the rest, the Federal Investment Tax Credit, but it’s constantly changing! Here’s what you need to know about the federal solar tax credit in 2022 (which also applies to geothermal heat pumps and solar batteries), and why you’ll need to act this year to maximize your savings.
What Is the Federal Solar Tax Credit for Solar Panels in 2022?
If you don’t know about the federal solar tax credit, officially called the Federal Investment Tax Credit (ITC) or Energy Efficiency Property Tax Credit, read more about how the credit works and how you can claim it on your taxes.
Today, however, we’ll be brief: the federal solar tax credit allows you to take a credit on your federal income tax equal to 26% of your total solar installation costs or geothermal heat pump installation costs for any residential or commercial installations in 2022. As an added bonus, you can also roll over any tax credit balance remaining into the following tax year.
At that 26% rate, most homeowners would see at least several thousand dollars back, and can change money-saving renewable energy upgrades from unaffordable to affordable for your Sacramento-area home or business.
For residential solar installation, the solar panels have to be installed and in service (turned on) before December 31, 2022. For commercial projects, construction must have started before the end of the year to qualify for the 26% rate.
Don’t Wait! 2022 Is the Last Year for the 26% Tax Credit Rate
Home and business owners can take advantage of the 26% rate for all of this year, but the ITC will drop next year in 2023, and in 2024 will be completely eliminated for residential solar. Here’s the full federal tax credit schedule for the future:
2024: Eliminated for residential, permanent 10% for commercial
If you’re thinking about upgrading to geothermal or solar panels for your California home or business soon, just know that you’ll save less the longer you wait—so reach out to Brower today to get started!
More Energy Independence: Solar Battery Backup
Just like solar panels, solar battery backup has been rising in popularity among California homeowners, particularly because of the threat of future PSPSs (public safety power shutoffs) from local utilities. Solar batteries for your home offer benefits like:
Using free renewable energy at night or during cloudy days
Avoiding peak demand charging and high electricity bills
Keeping the lights on during power outages
Solar batteries also qualify for the federal solar tax credit, as well as other California solar battery incentives that lower upfront installation costs, including the SGIP (Self-Generation Incentive Program), which offers more savings depending on the size of the battery, your income, or if you live in a High Fire-Threat District.