Putting in residence batteries is rising in popularity yearly, particularly when putting in photo voltaic panels. Vitality storage comes with a ton of advantages, like offering a supply of backup energy throughout a grid outage, decreasing a house’s reliance on the utility, and in some circumstances, decreasing electrical energy payments. The issue is that batteries are a reasonably important funding, with typical residential battery programs costing between $10,000 and $20,000.
However, householders wanting batteries are in luck – battery installations qualify for the federal clear vitality tax credit score. The tax credit score, generally known as the photo voltaic tax credit score or the federal tax credit score, can cowl 30% of the prices of a battery set up, making it one of many largest incentives obtainable for vitality storage.
Let’s look just a little nearer on the federal tax credit score and how one can declare it in your battery storage set up.
Batteries and the federal tax credit score at a look:
- Residential batteries put in in 2022 can qualify for the 30% federal tax credit score as long as they’re paired with photo voltaic panels.
- Beginning in 2023, standalone batteries put in with out photo voltaic panels can even be capable to benefit from the clear vitality tax credit score.
- The worth of the tax credit score will fluctuate relying on the tools put in and labor prices.
- Fashionable batteries just like the Tesla Powerwall and Enphase IQ 10 can get an estimated tax credit score worth of between $3,300 and $3,500.
- The battery should be put in on the taxpayer’s residence, owned by the taxpayer, and charged solely with photo voltaic vitality to say the tax credit score in 2022.
How a lot is the federal tax credit score value for battery installations?
The federal clear vitality tax credit score is the same as 30% of set up prices for quite a lot of clear vitality tasks like photo voltaic, battery, and geothermal warmth pump installations. So, if a battery set up value $10,000, it might obtain a tax credit score of $3,000. The complete 30% tax credit score is on the market till the top of 2032. The tax credit score worth will step all the way down to 26% in 2033, and down once more to 22% in 2034 earlier than expiring in 2035.
The photo voltaic tax credit score works like different tax credit the place it offsets what you owe in federal earnings taxes. In case your tax legal responsibility is lower than the worth of your tax credit score, the rest of the credit score will be carried over to the following yr’s taxes. For instance, in case your tax credit score is value $3,000 however you solely owe $2,000 in taxes, the remaining $1,000 can be utilized to scale back what you owe in taxes the next yr.
How a lot will a battery system value with the tax credit score?
The ultimate value of a battery system will fluctuate relying on the tools used and the labor prices, which may fluctuate fairly a bit. For a mean battery set up, you may anticipate to earn a tax credit score someplace between $3,000 and $5,000.
The next desk outlines some widespread battery manufacturers in addition to how a lot the set up of 1 would value earlier than and after the tax credit score:
|Battery||Estimated value earlier than tax credit score*||Tax credit score worth||Closing value after tax credit score|
|Enphase IQ 10||$11,000||$3,300||$7,700|
|LG Chem RESU10H-Prime||$10,500||$3,150||$7,350|
|Generac PWRcell 9 kWh||$14,500||$4,350||$10,150|
*Costs estimates based on available pricing information and estimated installation costs.
Does the battery need to be paired with solar to get the tax credit?
Batteries installed before December 31, 2022, need to be paired with solar panels and charged exclusively with solar power in order to take advantage of the federal tax credit.
Starting in 2023, thanks to the passing of the Inflation Reduction Act, batteries will not need to be paired with solar panels to qualify for the tax credit. This means that both stand-alone battery systems and batteries paired with solar panels will be eligible for the tax credit!
What if you add a battery to an existing solar panel system?
You can still qualify for the tax credit if you install a battery and pair it with solar panels that are already installed on your roof. The exact rules around this are a little unclear, but a 2018 ruling by the IRS signifies that battery storage, as long as it’s charged 100% with photo voltaic vitality, can get the tax credit score if it is put in after the photo voltaic panels.
Batteries put in after 2023 gained’t have to fret in regards to the 100% photo voltaic vitality rule.
Are you able to declare the tax credit score and use different battery storage incentives?
Sure, you may nonetheless get the federal photo voltaic tax credit score while you benefit from different vitality storage incentives. Battery incentives will be provided by state and native governments or utility corporations, and those which can be obtainable will fluctuate by location.
If the inducement takes cash off the upfront value of the set up, the tax credit score might be primarily based on the price of the system after the opposite incentive has been taken into consideration. For instance, as an example you reside in California and set up a battery system for $10,000 and obtain a $1,500 rebate by means of the state’s battery incentive program, SGIP. The value of your tax credit would be based on the price after the SGIP incentive, or $8,500.
If the incentive is through a utility virtual power plant program, where the utility gets to use the energy stored in your battery and in return pays you for the energy it used, the tax credit will still be based on the initial installation cost of the system.
Keep in mind that other battery incentives could have different qualifications, like requiring the battery to be paired with solar or allowing the utility to have access to the battery.
What batteries are eligible for the clean energy tax credit?
Batteries of all brands, chemistries, and costs are eligible for the tax credit. The main criteria you need to meet for a battery to get the federal tax credit are:
- The taxpayer must be the owner of the battery system
- The taxpayer must have a taxable income
- The battery must be installed at the taxpayer’s residence
- The credit can only be claimed on the original installation of the system
- The battery or batteries must be charged exclusively with solar energy from an on-site solar panel system
Batteries installed after 2023 must be at least three kilowatt-hours (kWh) in size, but will not have to be charged with solar energy.
Claiming the tax credit. To claim the federal tax credit, you need to fill out IRS form 5695 while filing your taxes for the year that the installation was completed. It’s best to consult a tax expert for details.
You can bank on the future of energy storage
Batteries are the key to unlocking a clean energy future, and the 30% tax credit is crucial in getting us there. Right now, battery storage is still very expensive and is a luxury for many homeowners. But, as power outages become more frequent, battery prices get cheaper, and as utilities continue to change how they bill their solar customer, batteries will continue to rise in popularity.
Homeowners who want to install a standalone battery as a source of backup energy should wait until 2023 to install it so they can also take advantage of the federal solar tax credit. But, for those wanting to go solar and have a battery, there’s no sense in waiting. Solar batteries already qualify for the full 30% tax credit and can offer you peace of mind next time your utility fails to keep your lights on. Our calculator can give you an estimate of how much the tax credit will save you on a solar plus storage system so you can decide if solar batteries are the right choice for you.