In this UNLAWYERLY tax special, Ramin gives a highlight of the 30% ITC tax credit that is proposed in the Inflation Reduction Act.
Disclaimer: none of this is tax or legal advice. Please consult your tax professional or lawyer.
In this UNLAWYERLY tax special, Ramin gives a highlight of the 30% ITC tax credit that is proposed in the Inflation Reduction Act.
Disclaimer: none of this is tax or legal advice. Please consult your tax professional or lawyer.
00:00
Okay. So let's talk real quick about the inflation reduction act and I'm not going to give you a discourse on the entire act, but there have been some questions regarding the tax credits that are place for for energy. Hence, why I said I was salvating at the mouth regarding those credits normal caveats.
00:20
This is not meant to be any type of tax advice. Any law advice, go talk with your own tax advisor, and/or lawyer, of course, if you guys have any questions can can feel those, but this is just supposed to be high level informational, specifically within the inflation, reduction Act, I wanted to focus on the 30% tax credit that is available for solar panels and it's kind of a big deal.
00:50
Right. Now those of you who are in the solar industry are just a renewable industry, say completely ecstatic because of just what this means basically that the down and dirty of it is the government is essentially subsidizing 30% of the cost for solar. And for those of you who had been keeping up with where renewables were and where it's at now for this year up until this point that the inflation reduction act came at the 206 per the credit was 26%, it had dropped in each year was set to drop until it was completely phased out.
01:30
What the IRA essentially did is that it extended the investment tax credit for 10 years and that's a big deal. That means that there's going to be a lot of companies that are going to want to invest and essentially take those tax credits to help reduce their tax liability Now.
01:50
So for some of you who are listening, you're like Ramin, I have no idea what you're talking about. Let me give you the quick building blocks of it. For those of you who own a home or are thinking about purchasing a home, One thing that you'll notice is that the cost of energy is going to go up and we're talking about brown power, traditional energy.
02:09
It's going to increase take inflation into account. Take into account that more and more people are going to be using energy. Look at climate change and what ultimately, this means is there needs to be a way to provide or come up with a more reasonably cost based approach for energy.
02:31
Well, my friends, we have that that's called renewable power. That's called the Sun, a big part of my career. I was invested in doing these things for for big companies. These were multi-million dollar deals in the hundreds. And ultimately, what we would help is bring those people who had the money to those people who knew what they were doing with renewables, marry them together and some type of partnership.
02:57
And essentially allow the investors to say, hey look, we're investing in green energy and they're going to get some tax credits to bring down their liability. And what it means for the day-to-day individuals taxpayers is, let's say you decide, ultimately that you're going to invest in solar And let's say your solar cost is and we're just going to use very basic numbers.
03:21
Let's say, it's going to be a thousand dollars. Well, the US government is going to help pay, $300 of that solar panel of the cost related, to the installation and the actual materials equipment, etc. Now, there are a lot of nuanced rules that go into it. For example, it has to be new, has been new to you, has to be installed on your primary residence to get that 30% tax credit on your tax return.
03:51
But ultimately, what it's doing is the government is helping to subsidize a big portion of it. Now if any of you are in it, in a short-term gain, ie you're thinking, hey, remember me, I want to see the advantage of the solar panels, right away. I'm gonna tell you this, it's not gonna work out that way.
04:09
Or if some of you are thinking that it's going to be free, it's not gonna be that way. But a lot of states have incentives to get people to go solar to help reduce that burden on brown powder, on traditional energy, by creating zero cost to you and some states, even give additional incentives of a thousand two thousand dollars.
04:31
Again, you need to check the state that where you live to help encourage people to invest and solar. And so before and again this this acne's officially pass through through the house and also get signed by President Biden. But ultimately, it's geared to happen, the 30%, notches it up an additional 4% and allows the 10-year, the extension to be for 10 years.
04:57
So if you did not want to do it, for example, this year, you want to do it the following year, you can do that as well. Furthermore, it allows battery up to a certain amount to be allowed as part of that credit. Now, if you were to ask me what I thought about batteries, when it comes to installations for solar purposes, or for residential purposes, I don't think the industry is where it's at right now.
05:21
I think batteries are, I haven't reached economies of scale, batteries are expensive and I think you have to have a reason for purchasing batteries solar power. A panels. On the other hand, I can tell you with our home that we just moved into right now. This is gonna be my second time getting solar pan.
05:41
So, I believe in it, I actually am adding additional panels about eight more panels, so that I can, once I get an EV because there's also 7,500 credit For electric vehicles, for new ones, up to certain income limits, based on household. So again, there are still a little bit of nuance rules in it.
06:00
When you add the EV component electric vehicle to sourcing that directly from your home. Well, basically you've cut a lot of the cost from your energy, use right away. Now, most people can finance, the solar panels. They're very low, interest rates. But really to be able to capitalize on getting solar panels, you should look at paying it off either right away or within 10 years.
06:29
Some of you may be saying, hey for me, I don't have that type of money to pay right now and that's fine. Because ultimately the amount that you're paying for utility cost is expected to go up on average about 5% per year. So when you take that into account you're basically doing a trade-off in the early years for paying for the solar panel, versus your utility cost and then down the road that utility cost is going to pay for itself.
06:56
For those of you who are thinking about it, there is a lot that that goes into the research aspect of it. One of the websites that I really like a lot. It's called energy sage.com where you can really investigate the panels. You can look at the various installers that are out there.
07:14
You can look at the various brands and I do recommend you doing your home beforehand. There are companies out there who that are very knowledgeable and that can help but I think it helps to go in there with a working knowledge to make sure you're getting panels that are in fact going to last you up to that 25 year warranty that they have and the degradation rate of the panels is not blow a certain point that you're not going to be able to maximize.
07:42
But look, we are at the point where renewable energies that's not going away and I think the passage of this act further shows that renewable energy is going to stay and it's going to become much more rapid and more householders are doing it. And so incentivize people to get on it now they're offering 30%, which is a huge deal when it comes down to how much the government is subsidizing.
08:08
And I think for those of you who are in it in the long-term gain and you should be, this is a great way to be able to add solar panels. Now, reduce your utility cost get this government to subsidize a big portion of it and compared to where solar was a few years ago.
08:28
It's become much more economical. There are economies of scale. There are a lot of companies that have been doing it for a long period of time so that you can ensure there is a guarantee when it comes to getting these installed and making sure that the warranty is in fact there.
08:46
But I think that the tax credit with the government, increasing it back to 30%, just shows the commitment to wanting more people to get it. And so what this will mean for you from your tax, return perspective is whatever. The cost of the panel is again, let's just use a very simple, $1,000, you'll ultimately recognize that $300 back.
09:11
Now solar panels with the panels itself, the inverter and also the installation you can expect on average and it's going to vary based upon where you are living. It's gonna cost somewhere between 20 to 30,000, there are some soil panels that go much more. It's depends on your system size.
09:31
How much are you trying to offset from brown paper or traditional energy? And so when you are working with a company, they're going to take your energy usage, ie, or utility bills and see how much you use. And ultimately, they'll try to get you out. A hundred percent offset, a hundred and ten percent offset or you can do below or lower states.
09:53
Also have various type of incentive programs through net metering. And again, you need to look at the laws of your state to see what it is. But net metering basically says the amount of energy that you produce through your soil panels will get fed back into system most often and they'll give you a credit Most places.
10:10
It's one for one, Some places are used or lose some people places are you can carry it over, IE, if you produce more than you're using, You can carry it over for a period of time. And then there are programs out there known as SRX, where you ultimately, just, for example, in Virginia, the fact that you're producing energy, you will be able to sell those certificates.
10:34
In the market, a company will want to buy them and say, hey, look, we may not necessarily have solar panels, but we're investing in and green and green energy and you can get for example, 50 to 60 dollars per 1,000 kilowatt hour and on a yearly average again depending on your system size that's about $800 that you're getting just for the fact that you have solar, So various programs that are out there.
10:59
The inflation production act. It has other credits there, especially related to energy. They're also some health care components. This little quick and dirty conversation is just on the 30% investment tax, credit related to installing solar at your home. And it is a good. It's a decent size, subsidization, by the government that when you look at it from a long-term perspective, ie even if you would look at it from 10 years, you could be at a point where you're not paying anything for your utility costs as it relates to electric use.
11:35
If you have an electric vehicle and you're capitalizing on the 7500 credit for new cars, or 4,000 for used cars, you basically are able to use if you add additional panels for your vehicle and that saves you from gasoline costs, Again long-term strategy. But for those of you who are thinking about it from that type of perspective, the this is a really good opportunity to be able to use it for your tax purposes and also reduce your tax liability.