The Inflation Reduction Act (IRA), signed in August 2022, has different benefits starting in 2022, 2023, and 2024. Two tax credits were adjusted in the new year, to add incentives for homeowners with solar energy and battery storage. Here are the basics for the two credits.
1. Energy Efficient Home Improvements Credits
Before 2023, the tax credit had a $500 lifetime maximum.
Beginning January 1, 2023, the amount of the credit is equal to 30% of the sum of amounts paid by the taxpayer for certain qualified expenditures, including
(1) Qualified energy efficiency improvements installed during the year.
(2) Residential energy property expenditures during the year.
(3) Home energy audits during the year.
There are limits on the allowable annual credit and on the amount of credit for certain types of qualified expenditures. The credit is allowed for qualifying property placed in service from January 1, 2023 - January 1, 2033.
2. Residential Clean Energy Property Credits
The credit is applicable for Tax Year 2023 - 2034.
The amount of the credit depends on the year it was placed into service:
Before January 1, 2022: 26%.
December 31, 2021 - January 1, 2033: 30%.
December 31, 2032 - January 1, 2034: 26%.
December 31, 2033 - January 1, 2035: 22%.
Battery storage technology was added as an eligible expenditure for this credit, with a tax credit increased from 26% to 30% of the battery cost.
Check the IRS portal for more details.
The IRA shows that the government knows that energy transformation to clean energy is inevitable and should become mainstream. In some states like California and Hawaii, local supportive incentives programs encourage residents to transform to clean energy.
Franklin Home Power has been eligible for both the Self-Generation Incentive Program (SGIP) in California and the Hawaii Battery Bonus Program. FranklinWH California homeowners could be eligible to gain additional incentives totaling 25% cost savings from the SGIP, while Hawaii homeowners could gain up to a $14500 bonus from Hawaii Battery Bonus Program. Check SGIP-FHP and Hawaii Battery Bonus-FHP for more details.
With the new Inflation Reduction Act credits, qualified FranklinWH homeowners will benefit from Residential Clean Energy Property Credits. California and Hawaii homeowners could benefit from the Inflation Reduction Act and local incentive programs.