Solar energy and energy storage systems have emerged as powerful tools in the quest for sustainable and resilient energy solutions. Recognizing their immense value, both the federal government and various state governments have implemented incentives to encourage the adoption of solar panels and energy storage technologies
The Inflation Reduction Act (IRA) of 2022 provides for a 30% solar income tax credit as a federal incentive, allowing homeowners to claim a credit on their income tax return for the cost of installing solar panels or batteries on their home or business. The credit is now available for battery-only installations, without solar.
The tax credit equals 30% of the entire system cost, including labor and installation. The credit comes right off the total federal taxes owed (it is not a line-item deduction), and can be carried forward to future years if needed. The 30% credit is available through 2032, will be reduced in 2033 and 2034, and eliminated for most commercial solar projects in 2035.
Under the IRA, Tax Exempt organizations (i.e. non-profits, universities, churches), States, tribes, municipalities receive and additional direct payment equal to 10% of the cost of solar & storage project from the federal government. Additionally, the Low-Income Community Bonus offers tax credits of 10% if the project is placed in certain low income census tracts, and 20% if that project also meets requirements to benefit that community (such as micro grids and community solar).
The Domestic Content Bonus Credit (DCBC) extends this 10% direct payment to commercial projects if all steel and iron are US-made, and manufactured components meet percentage thresholds. This threshold is 40% for 2023-24, and gradually rises to 55% by 2026. However, recent IRS guidance outlined a complex process for meeting domestic content manufacturing. It specifies that all major components, including the solar cells, must be assembled in the US. Currently, no manufacturer meets this requirement, although this is likely to change.
Many state and local governments offer rebates for solar and storage installations. The amount of the rebate varies from state to state. DSIRE is the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University,