Signed into law by President Joe Biden on August 16th, the Inflation Reduction Act is a huge win for the planet and the renewable energy industry. Here’s what this landmark climate bill means for the future of clean energy in the U.S.

Background of the 2022 Climate Bill

Climate action was a major component of President Biden and Vice President Kamala Harris’ campaign platform. Originally, the White House wanted to include climate provisions in what was called the Build Back Better Act, but this legislation failed to progress through Congress.

Senate Democrats then set out to pass Build Back Better in pieces, to cover priority issues like healthcare, tax reform, and fighting global warming. Sen. Joe Manchin and Sen. Kyrsten Sinema, the Senate’s two swing votes, presented significant obstacles to passing any reform in these areas. In July, things looked grim for climate action when Sen. Manchin announced that he would not be supporting any new legislation for renewables and climate change. 

But after months of negotiations between Senate Majority Leader Chuck Schumer and Sen. Manchin, the Inflation Reduction Act (IRA) was proposed – a budget package aimed at curbing inflation, reducing healthcare costs, reforming tax code, and investing in clean energy. After an amendment by Sen. Sinema, the bill passed the Senate vote and the House of Representatives’ vote along party lines.

This sweeping budget bill ultimately invests a historic $369 billion in clean energy and fighting climate change.

What is in the new climate bill?

The Inflation Reduction Act of 2022 includes $369 billion in climate-related investments – the largest federal investment in renewable energy in the history of the United States.

The bill will use billions of dollars in tax incentives to boost the adoption of clean energy and energy efficient technologies, with the goal of reducing greenhouse gas emissions by 40% by 2030.

Here’s what’s covered by the new tax incentives.

Clean Energy

The climate package invests billions of dollars into expanding the manufacturing and adoption of renewable energy. It provides production and investment tax credits to ramp up U.S. manufacturing of solar panels, wind turbines, batteries, and electric vehicles. 

The bill also provides tax credits for consumers who invest in clean tech, including rooftop solar! More on this below.

Electric Vehicles

The bill includes a $4,000 tax credit for lower and middle income individuals to purchase used electric cars, and a $7,500 tax credit for new vehicles.

Heat Pumps, Electric Water Heaters, and Other Clean Tech

The package provides tax credits to consumers who add clean technologies to their houses with the goal of helping the American people reduce their energy costs and the use of fossil fuels. These include heat pumps, electric water heaters, and electric HVAC. 

Plus, there will be additional rebates and grants for low-income households and affordable housing to make energy efficient upgrades.

What does this mean for the Federal Solar Income Tax Credit?

We’re excited to say that the Inflation Reduction Act includes an extension and expansion of the Solar Investment Tax Credit! The ITC, or Federal Solar Tax Credit, has been instrumental in the growth of the solar industry since its inception in 2005. 

When it was originally passed in 2005, the federal tax credit covered 30% of the cost of a home solar installation. However, it’s seen a decline over the years: it was at 26% this year, and was set to drop to 22% in 2023 before going away completely in 2024. 

Luckily, this new climate bill has restored the ITC at 30% and extended it for 10 more years. It’s also retroactive, applying to any installation that occurred after December 31, 2021.

This is huge news: any residential solar installation that has taken place in 2022 or takes place over the next decade is now eligible to get 30% of their costs back on their income taxes.

What does this mean for New Yorkers looking to go solar?

The 30% Federal Tax Credit will make it that much easier for homeowners across the country to switch to solar power. But for homeowners in New York City, that’s not all!

New York City is home to some of the richest solar incentive offerings in the country. This means that New Yorkers going solar can now claim the new 30% tax credit on top of the many NY solar incentives provided by the city and state, too. As a result, the average solar installation in NYC could see its costs reduced by up to 70%!

Now’s the Time to Go Solar

Needless to say, it’s an exciting time for solar energy. With the passing of this historic legislation, the federal government is giving clean energy the endorsement that so many activists and industry leaders have been fighting for. Clean energy is the future – join us!

With the new 30% credit available now, we’re expecting to see a huge uptick in demand for solar in NYC.  

Get ahead of the rush and secure your tax credit now. Schedule a free consultation today!

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