Inflation Reduction Act
THE NEW LAW THAT HAS BIG SOLAR INCENTIVES
The Inflation Reduction Act (IRA) was signed on August 16, 2022, immediately changing the size and scope of solar incentives available to
businesses and non-profits.
Investment Tax Credit
- The ITC can be increased an additional 10% or 20%, depending on the location of the project and domestic content of components.
- The 30% ITC will be effective through 2032 and then steps down to 26% in 2033 and 22% in 2034.
- In 2023 and beyond, commercial customers can transfer (sell!) these credits to another commercial entity. This ability to transfer credits means that more businesses can monetize the tax benefit and you no longer are required to have a tax bill that exceeds the cost of the ITC!
- Nonprofits and Municipalities – This is for you! The federal government will reimburse 30% of the cost of a solar installation, through a mechanism knows as Direct Pay. This percentage could be reduced in 2024 if certain requirements are not met.
- The percentage available for Direct Pay, like the ITC, could be increased 10% or 20% when certain conditions are met, such as the location of the project in economically distressed areas.
- Direct Pay is available beginning Jan 1, 2023.
- There are many administrative unknowns associated with the Direct Pay option, as it is a new federally administrated incentive, and the federal government anticipates releasing full guidance in the next three to four months.
Rural Energy for America (REAP) Program Grants & Loans
- The USDA’s REAP Grant has been boosted from 25% to 50% of the project cost. This program is only eligible for businesses in rural locations and does require an application.
- Combining the REAP Grant with the ITC and other tax benefits such as accelerated depreciation can significantly reduce the cost of cutting your carbon footprint. We encourage you to consult a tax professional to ultimately determine how impactful these tax incentives can be for your solar investment.