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  • Sun Directed

The Inflation Reduction Act’s Solar Tax Credits Explained

Last Monday, President Biden signed the Inflation Reduction Act (H.R. 5376) into law. This historic bill covers a lot of ground including the allotment of $370 billion toward clean energy, solar, electric vehicles, efficient manufacturing, and environmental clean-up over the next decade. Here’s our breakdown of what that means for solar.

The Inflation Reduction Act increased the Investment Tax Credit for solar projects from 26% to 30% and extended it until the end of 2032. This credit applies to all residential and commercial solar projects including those installed in 2022.

Prior to H.R. 5376, energy storage projects were ineligible for tax credits unless they were directly connected to solar. This requirement has now been waived allowing stand-alone battery facilities to also qualify for the 30% tax credit.

Solar projects located in former ‘energy communities’ can earn an additional 10% tax credit. Energy communities are first defined as brownfields, and secondly as locations associated with fossil fuels over the last generation.

There is yet another 10% credit for solar power projects that sell their electricity via community solar projects to low-income individuals. So with the 30% Investment Tax credit, 1 10% credit if located in a former fossil fuel energy community, and 10% for selling electricity via community solar to low-income families, some projects may qualify for a 50% tax credit!


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