Insights on the Solar Power Tax Credit for Businesses

The Inflation Reduction Act (IRA) of 2022, with its new federal tax credit expansions and expiration dates, has been added to the list of potentially confusing factors for business owners as they make energy decisions for their organizations. Geoscape Solar is here to help navigate these rapidly changing developments so business owners can reach ROI faster with their solar installation.

The team at Geoscape Solar is dedicated to saving your business money at tax time and meeting the individually tailored energy needs of any organization. They will help reduce or even eliminate your organization’s energy bills. Under the new IRA, business owners can take advantage of revised and lucrative tax credits geared toward incentivizing commercial solar installation.

What Is the Inflation Reduction Act of 2022?

The IRA was enacted in August 2022 to help working families and business owners struggling to pay for energy and other expenses while making a positive environmental impact by significantly lowering carbon emissions. According to solar industry-related publication PV Magazine, the bill covers a broad range of topics, including those related to corporate taxes, healthcare delivery, and most importantly for commercial solar, energy-related legislation.

The IRA aims to accomplish these goals by creating attractive incentives for businesses and other organizations to “go solar,” thereby tackling growing climate change concerns alongside other renewable energy technologies.

According to Utility Dive, nearly $370 billion has been invested in energy security and climate change programs under the act, which will come to fruition over the course of a decade. The hope is that by locking in current tax incentives for green energy implementation and utilizing renewables such as commercial solar energy, the bill will generate new jobs and economic drivers to stimulate clean energy tech sectors. These investments will specifically target renewable energy development. This includes solar energy system installation options, with the goal of increasing energy efficiency and removing some of the economic sting currently felt by businesses and other consumers as prices of gas and oil continue to climb.

The IRA plan is multifaceted. One of its significant components is offering attractive financial incentives “to go solar,” removing old barriers that once held business owners back from investing in commercial solar energy systems.

What is the bottom line for business owners regarding the IRA? For corporations, nonprofits, and other organizations, it means higher tax credits offered for a longer period compared to previous tax incentive programs. It also means a business owner will see a faster return on their solar investment when choosing to purchase a commercial solar energy system immediately. Another core aim for the IRA credit updates is to craft lower and more stabilized energy costs for businesses. According to a recent Utility Dive report, a major goal of the IRA is to introduce an “extension and expansion of the tax credits” previously offered to make energy costs more predictable.

IRA and the Major Changes to Solar Tax Credits

Business owners who explored previous tax incentive programs at the state, local, and federal levels may already be familiar with the investment tax credit (ITC). Under this set of federal tax incentives to implement solar energy, the federal government offered a tax credit for the installation of commercial solar energy systems. Those credits provided a “dollar-for-dollar reduction in corporate taxes” to an individual business owner based on a particular year’s allocated tax credit percentage. The credit decreased during a specific timeline according to the year that the solar energy system was installed.

However, there are now major changes to federal tax credits under the IRA. According to the recently published summary produced by solar industry leader SEIA, the act contains extensions to tax benefit deadlines and increases the percentage of the tax credit discounts offered.

For example, pre-IRA, the ITC offered business owners a 26% tax credit in 2022, which would then decrease to 22% in 2023. The credit would reduce even further to 0% in 2024 and beyond. At this point, the tax credits would have expired. However, with the IRA, these benefits have been changed to a 30% tax credit in 2022 and will extend until the end of 2032.

Also, starting in 2033, the percent credit offered drops to 26% and then to 22% the following year. In 2035, these tax credits will end completely at 0%.

Act Fast

Although the 2030s may seem like the distant future, business owners only have a few years to take full advantage of the maximum tax credit benefits offered by the IRA. Business owners should act now to take full advantage of the highest rates to maximize their ROI in the shortest time possible.

According to EnergySage, Inc., the price of implementing a commercial solar energy system has decreased by approximately 13% during the last five years. Delaying the decision to go solar now will result in lost opportunity costs of years of saving on energy bills.

As traditional energy sources continue to increase utility bills, now is the time to contact Geoscape Solar and maximize your ROI with the lucrative federal tax credits contained within the IRA.

At Geoscape Solar, we help businesses utilize solar energy for profit. Your business will become energy independent, be able to decrease utility costs, and leverage available solar incentives for a quick ROI.

To discover how installing solar energy on your property will increase your business profitability, contact one of our energy specialists!