FAQs About the Inflation Reduction Act Solar Tax Credit
Mar. 09, 2023
The Inflation Reduction Act of 2022 (IRA) created many new ways for homeowners to save on clean energy upgrades like solar panel installation. If you’re interested in the Inflation Reduction Act solar tax credit but have some questions about how it works, you’re in the right place! In this blog, we’ll answer some of the most common questions we’ve been asked about the Inflation Reduction Act solar panel tax credit and how it applies to Massachusetts homeowners.
What Is a Tax Credit?
A tax credit is an incentive that reduces the amount of money you owe in federal taxes, dollar-for-dollar. So, if you owe $1,000 when you file your taxes, and you have an $800 tax credit, you would only have to pay $200.
There are many different types of tax credits available, including child and dependent care tax credits, tax credits for educational expenses, electric vehicle tax credits, and more. The Inflation Reduction Act created tax credits to help taxpayers save on solar panel installation and other energy efficiency home improvements.
What Is the Solar Panel Tax Credit in 2023?
The solar panel tax credit is a tax credit that goes by many names, including the federal solar tax credit, the solar Investment Tax Credit (ITC), and the Inflation Reduction Act solar tax credit. It is a dollar-for-dollar federal tax credit that is worth 30% of your total solar installation costs.
What’s Covered by the Solar Tax Credit in Massachusetts?
The federal solar tax credit covers almost all of the expenses associated with a solar installation, including:
- Solar PV (photovoltaic) panels
- Solar batteries that have a capacity rating of at least 3 kWh
- Wiring, inverters, and mounting equipment
- Solar installation costs
- Solar permitting and inspection fees
How Do You Qualify for the Federal Solar Tax Credit in 2023?
There are a few requirements you must meet in order to qualify for the solar tax credit:
- Install your solar panel system at a residence you own in the United States
- Own your solar panel system (leases and PPAs do not qualify)
- Have taxable income
The solar tax credit will be available at its 30% rate from 2022 until 2032. To qualify for the solar tax credit in a given year, you must complete your solar installation and turn your system on before the end of that year. So, if you want to claim the ITC on your 2023 tax return, you must complete the installation by December 31, 2023.
Can the Solar Tax Credit be Rolled Over?
Yes—if you receive a tax credit that’s worth more than your annual tax liability, you can roll the remainder over into the next year.
Does the Solar Tax Credit Cover Battery Storage?
The new Inflation Reduction Act solar tax credit includes energy storage devices that have a capacity rating of 3 kWh or greater. You can claim the tax credit on a solar plus battery storage system, a solar battery retrofit, and standalone solar battery storage.
Can You Claim the Solar Tax Credit for Your Vacation Home?
You can claim the federal solar tax credit on your primary and secondary residences as long as they are located within the United States. If your secondary residence or vacation home doubles as a rental property, it is not eligible for the residential solar tax credit but may qualify for the commercial solar panel tax credit.
How Does the Solar Energy Tax Credit Affect Other Massachusetts Solar Incentives?
In most cases, claiming the federal solar tax credit will not have an impact on your eligibility for other Massachusetts solar panel incentives. You will still be eligible for net metering, SMART incentives, and ConnectedSolutions solar battery incentives.
Get Answers to All Your Questions About Solar Installation in Massachusetts
Boston Solar is the leading solar provider near you in Massachusetts, and we can help you save on solar with incentives like the federal solar tax credit. We are a local solar installer that’s been empowering Massachusetts for over a decade and has installed more than 5,000 solar energy systems. If you want a local solar expert to help you get the most out of your investment in solar panels, we are here to help.
Save 30% with the federal solar tax credit in 2023. Call 617-858-1645 or contact us to schedule a free solar assessment.