Senate Democrats have been negotiating over climate and clean energy legislation for months. Things looked grim in mid-July, when the Senate’s swing vote, Sen. Joe Manchin, decided that he would not be supporting any climate legislation this year. 

But in a quick reversal, it was announced this week that Sen. Manchin and Sen. Schumer had come to an agreement on a budget package aimed at inflation reduction that would invest $369 billion in climate and clean energy. Though it’s not official yet, here’s what it could mean for climate change and the solar industry.

What climate provisions are in the Inflation Reduction Act of 2022?

The Senate’s latest proposed budget package, the Inflation Reduction Act of 2022, would include $369 billion in climate-related investments – the largest federal investment in renewable energy in the history of the United States.

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

Here’s what could be covered by new incentives if the bill passes.

Clean Energy

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

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

Electric Vehicles

The bill is expected to include a $4,000 tax credit for lower and middle income to purchase used electric vehicles, and a $7,500 tax credit for new vehicles.

Heat Pumps, Electric Water Heaters, and Other Clean Tech

The package would provide tax credits to consumers who add clean technologies to their homes with the goal of helping Americans reduce energy costs. These include heat pumps, electric water heaters, and electric HVAC. 

Plus, there would 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’s currently at 26%, and is set to drop to 22% in 2023 before going away completely in 2024. 

If passed, however, the Inflation Reduction Act would restore the ITC at 30% and extend it for 10 more years. It would also be 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 would be eligible to get 30% of their costs back on their income taxes. (For New Yorkers, this is in addition to the rich NY solar incentives provided by the city and state.)

When will the bill be brought to a vote?

The Inflation Reduction Act is expected to be brought to the Senate floor for a vote as early as the first week of August, before the summer recess. Until then, nothing is official. But we’re cautiously optimistic that the package would have the support it needs to pass both the Senate and the House. Stay tuned!

Now’s the Time to Go Solar

Needless to say, it’s an exciting time for solar energy. If this bill passes, we expect to see a huge uptick in demand for solar in NYC. In order to get your 30% credit next tax season, you’ll have to go solar this year. 

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

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