What is the Inflation Reduction Act (IRA)?
Passed by congress in August, 2022, the Inflation Reduction Act will highlight the opportunity businesses now have to utilize clean energy sources rather than fossil fuels. This new act is mainly centered around rewarding those that choose to go green with clean energy and release less carbon emissions.
The IRA includes a credit on your federal income taxes, equal to 30% to 50% of project costs. This is a huge benefit for companies looking into cleaner energy sources but do not have the budget for it.
This is a great step in the right direction to promote sustainable business practices. If you and your company are interested in how you can benefit from the IRA, read this blog to learn more about the ways you can save when going green.
How will the IRA affect businesses looking to invest in solar energy?
If you are using clean energy sources
This bill includes a 30% investment tax credit, increased from its original 26%, for using and/or upgrading to energy-efficient appliances such as heat pumps, windows, solar photovoltaic (PV) panels, and more from now until 2032.
An important thing to note is that solar panel installation will provide additional tax incentives and rebates, beyond the current 30% being offered. The Production Tax Credit, previously only covering the wind turbine industry, is now applicable to the solar power industry as well. As long as a solar energy project meets the prevailing wage requirements, you are eligible to receive a 2.5 cents/kWh energy tax credit for the first ten years of a project’s life.
Another notable adjustment to the Inflation Reduction Act is its loosening of requirements on energy storage projects. Previously, an energy storage project was only eligible for a tax credit if it was directly linked to a solar power project. Now, this is no longer the case. This means that batteries connected to a solar power project will continue to qualify for the credit, even if they are no longer being charged by solar power.
If you are not using clean energy sources
Most importantly, it is not too late! This bill, along with the investment tax credit it entails, will be in effect until 2032 so that you have the opportunity to invest in clean energy sources for years to come.
The Inflation Reduction Act does not directly affect those that choose not to use clean energy sources by charging an additional tax. However, you will not qualify for the tax credit being offered to those who are contributing.
Why this matters
Cleaner energy- greener earth
The IRA impacts the clean-energy industry by promoting and facilitating a more financially stable way of acquiring the materials needed in order to utilize better energy sources. Because of this bill, it is likely that greenhouse gas emissions will decrease 42% by 2030.
Avoiding strenuous power fluctuations and utility costs
Investing in low to zero-emission energy projects will save you from future headaches due to strenuous power fluctuations that have the potential to continually interfere with business functions. This is now a problem of the past for companies utilizing clean electricity.
These spikes in utility cost that we are seeing now may be seen as a crisis, but it could be a turning point operationally for businesses going the emissions reduction route.
With solar energy, businesses are able to take advantage of financial incentives and invest in solar while the return on investment is high. By implementing renewable power, companies can take the opportunity to control their own resources, manage their utility usage, and offset monthly spiking energy expenses.
Get started with solar energy with Smart Roofs
With this new bill, companies have the potential to save big on clean energy investments by using and/or upgrading to various energy-efficient appliances.
One of the best ways to start your journey to utilizing renewable energy is by installing a solar roof. Not only does this cut energy costs with tax credits but also yields many other incentives such as savings on your electric bill each month.
To learn more about the benefits of solar energy, reach out to us here at Smart Roofs so that we can find the best solution for you!