The Inflation Reduction Act that became law in August included a provision that increases, expands, and extends the investment tax credit (ITC) for solar photovoltaic systems installed on residential properties. The law restores the 30% tax credit that was previously available for systems installed prior to 2020 and is applicable to qualifying installations completed between 2022-2032. The tax credit then decreases to 26% for systems installed in 2033 and 22% for systems installed in 2034, before expiring in 2035.
In addition, the ITC has been expanded to include the cost of energy storage devices that have a capacity rating of 3 kilowatt hours or greater. This includes stand-alone storage devices as well as storage batteries incorporated into a solar photovoltaic system.
For a homeowner installing a typical rooftop solar system, the Department of Energy estimates the 30% tax credit will result in an average dollar-for-dollar tax reduction of $7,500 for the average system. Plus, there is no maximum amount of tax credit that can be claimed.
Massachusetts homeowners may also qualify for a 15% state solar tax credit, up to a maximum of $1,000.
It is important to note that solar photovoltaic systems installed in 2020 and 2021 remain eligible for a 26% tax credit. If a homeowner installed a solar system during this time period and has not yet claimed their ITC, there is still time to file an amended return.
If you have any questions about the solar investment tax credit or other tax credits, please contact Gray, Gray & Gray at (781) 407-0300.