The federal government has long offered tax credits for new solar installations in order to encourage Americans to adopt clean energy sources. Recently, they’ve introduced a new incentive to drive solar users towards US-made equipment for new solar power systems. It’s called the Domestic Content Bonus Credit, and it can provide you with additional savings on your new solar project, provided you meet all the requirements. Here’s what you need to know.
What Is the Domestic Content Bonus Credit?
This credit was introduced in 2022 as part of the Inflation Reduction Act, with the goal of strengthening the US manufacturing supply chain while also accelerating the adoption of renewable energy. The credit provides an extra percentage on top of the already existing solar investment tax credit (ITC), if the project meets domestic content requirements. In other words, if your new solar installation uses enough US-made materials and equipment, you can receive more than the usual ITC percentage on your next tax return.
What Are the Requirements?
So, just how much of this domestic content do you need in your system? The answer can actually differ depending on whether the component in question is a steel or iron product, or if it’s a fully manufactured product like a panel, inverter, or racking system.
For steel or iron that’s used in a project (e.g., for foundations, racking, and structural elements), the material must be entirely produced in the United States. For manufactured pieces of equipment. At least 40% of the total cost of manufactured products used in the solar power system need to be made in the US. However, that percentage is increasing to 55% for projects that begin construction after 2026.
These requirements need to be tracked very carefully, and the installers need to certify that the system is compliant if you hope to claim the bonus credit.
How Much Is It Worth?
Of course, you’re probably asking just how much this credit can put back into your pocket. If your project is under 1 megawatt (as most residential systems are), you can add 10% to the standard solar ITC. So, instead of receiving a credit for 30% of your system’s total cost, you’ll get a credit for 40% of the installation cost. This can translate to significantly increased savings on those upfront costs for installing a system.
Finding the Right Equipment
Of course, claiming this credit requires you to find equipment that meets those domestic content requirements in the first place. With the growth of the solar industry, there are now many brands of solar equipment manufactured and sold in the US that meet these requirements. For example, you’ll find that every Mission solar panel for sale was manufactured in San Antonio, Texas, while Enphase sells microinverters manufactured in South Carolina, Wisconsin, and Texas. If you take the time to shop for American-made products, you’ll find yourself saving more money in the long run while supporting American manufacturing.
