As a result of the recently passed Inflation Reduction Act, homeowners will have a greater incentive to invest in renewable energy sources in addition to reducing their energy costs and carbon footprint. One of the underlying goals of this bill was to promote investment in clean energy, and the government is hoping to stimulate this through offering tax credits. The Residential Clean Energy Credit, formerly known as the Residential Energy Efficient Property Credit, was recently extended to apply to property placed in service prior to January 1, 2035. For 2022, a 30% credit is available for the following eligible expenditures:
- Solar electric property
- Solar water heating property
- Fuel cell property
- Small wind energy property
- Geothermal heat pump property
- Biomass fuel property (but only through 2023)
Battery storage technology is also added to the list of qualified expenditures eligible for the credit, applicable to expenditures made after December 31, 2022.
The 30% tax credit is extended through the end of 2032. The credit will then be phased down to 26% in 2033 and to 22% for 2034.
The cost of the hardware and the expenses of installing the new system are also covered under this credit. Costs such as labor for on-site preparation, assembly, and installation of the equipment and for piping or wiring to connect it to your home may also be included.
This credit can be extremely beneficial to taxpayers as it may reduce their overall tax liability by up to 30% of their qualifying clean energy costs. In addition to this federal tax credit, there are other incentives offered by state and local governments as well as public utilities that may also help subsidize the costs of the investment. If you would like to discuss how your investment in a renewable energy system for your home may also deliver tax savings, give us a call at (401)-921-2000 or fill out our online contact us form.