Maximize Your Savings: Batteries Now Qualify for the Solar Tax Credit in the Inflation Reduction Act
Looking to cut down on your energy bills and become more energy independent? Pairing battery storage with solar is a great option, and now you can also take advantage of the 30% Residential Clean Energy Credit for qualified battery storage technology expenditure.
The Inflation Reduction Act, signed in August 2022, expanded the tax credit to include battery storage equipment “placed in service” after December 31, 2021, and before January 1, 2033. This means that if you installed solar and/or battery in 2022, you could now receive a federal tax credit of up to 30% of the gross cost of the project.
It’s essential to consult with your CPA or tax advisor before filing, but the good news is that the new tax credit applies retroactively to solar and battery storage installed in 2022. With this incentive, you can maximize your savings and enjoy the benefits of clean energy for years to come.
First off, are we sure batteries qualify for the new solar tax credit?
Yes. We know it’s been a roller coaster ride waiting for a climate bill to expand solar and battery incentives. But the ride is over, and battery storage definitely qualifies for the 30% federal tax credit, in addition to solar, wind, geothermal heat pumps, and fuel cells.
The Inflation Reduction Act (IRA) was signed into law on August 16, 2022, and it specifically addresses the Residential Clean Energy Credit for “qualified battery storage technology expenditure” in Section 13302.
Essentially, the IRA amended the schedule for the previous tax credit so it would remain at 30% for solar and battery equipment “placed in service” after December 31, 2021, and before January 1, 2033.
The 30% Residential Clean Energy Credit is effective immediately and applies retroactively to solar and battery storage installed at any time in 2022. So if you purchased solar and/or battery in 2022, your available federal tax credit increases from 26% to 30% of the gross cost of the project.
New Solar Tax Credit Now Includes Battery Storage
The Inflation Reduction Act (IRA) was recently signed into law, and it has brought exciting news for those investing in solar and battery storage. The new legislation expands the federal tax credit for solar and other clean energy installations to include battery storage equipment, making it eligible for a 30% tax credit.
This is a significant victory for those who invested in solar and battery storage in 2022, as the new credit applies retroactively. The 30% tax credit is adequate immediately and will remain in place until December 31, 2033. Any qualified battery storage technology expenditure placed in service after 2021 is eligible for the full 30% tax credit.
With the new solar tax credit now including battery storage, homeowners and businesses nationwide can enjoy an even bigger return on their renewable energy investments. This is good news for those looking to reduce their carbon footprint and use clean energy sources.
Find Out If Your Battery Storage Qualifies for the Federal Tax Credit
Are you considering investing in solar battery storage? If so, you may be eligible for a 30% tax credit. But what counts as a qualified battery storage technology expenditure?
To qualify for this tax credit, the battery must be installed in connection with a dwelling unit located in the United States and used as a residence by the taxpayer. Furthermore, the battery must have a capacity of not less than 3-kilowatt hours. This requirement will take effect in 2023, so most batteries will easily exceed the minimum amount.
There is no maximum size, price, or tax credit qualification for the federal tax credit for battery storage, and you can enjoy a 30% tax credit on as large of a battery system as you’d like. However, bigger isn’t always better. Do your research and find the right size and model for your needs.
Standalone Battery Now Qualifies for Residential Clean Energy Credit
As of January 1, 2023, standalone battery storage will be eligible for the 30% Residential Clean Energy Credit, making it an attractive option for homeowners. Standalone batteries can be used as a backup energy source during natural disasters and power outages.
They can also help save money by storing electricity during off-peak hours. With Time-of-Use rates varying throughout the day, battery storage can shift grid usage from high- to low-cost periods, potentially adding up to significant savings. Say goodbye to expensive gas generators and hello to a more sustainable and cost-efficient energy solution.
Can I get the tax credit for the battery if I already used it for solar?
Homeowners may be eligible to use the Residential Clean Energy Credit for battery storage added to existing solar systems. The Internal Revenue Service (IRS) and the Department of Energy (DOE) have yet to provide guidance on the matter. However, a homeowner who purchased solar in 2022 and claimed the tax credit for it could also add battery storage in 2023 and claim the tax credit for that installation.
Applying the Federal Tax Credit for Solar Battery Storage
It is important to note that the Residential Clean Energy Credit is a nonrefundable credit that can be used to lower a homeowner’s federal tax liability. This means that the tax credit is not a check that comes in the mail but rather a credit that can be used to reduce one’s federal tax liability beginning in the same tax year that the battery was installed and deemed operational by a government inspector.
Example Scenarios:
Scenario 1: When Your Tax Liability Exceeds Your Tax Credit
If you spent $50,000 on a solar and battery installation in 2022, you would be eligible for a $15,000 tax credit. But if you have a tax liability of $17,000, then the entire $15,000 credit may be used to reduce that amount to just $2,000.
Scenario 2: Your Tax Credit Exceeds Your Tax Liability
If you’ve purchased the same system as above and received the same $15,000 tax credit, but your tax liability is only $8,000, then the Residential Clean Energy Credit may be used to lower that amount. The remaining $7,000 may then be carried over to the following tax year.
According to the IRS, the Residential Clean Energy Credit is active until December 31, 2032, and may be carried forward during this time. For more information on how to use your federal tax credit, check out this video.
It is essential to consult with a CPA or tax advisor before filing any tax-related decisions. The content of this article is for informational purposes only.
Is Solar Battery Storage Necessary?
So if you’re considering a solar array, taking a look at a battery backup storage system is a great way to maximize the savings you can achieve with solar.
Are you thinking of adding solar to your home? Consider whether solar battery storage is the right choice to make. It can provide various benefits, from power during blackouts or Planned Safety Power Shutoffs to energy independence to banking solar electricity for use at night. Evaluate your needs and determine if a battery backup and storage system is the right fit for you.
The benefits of pairing solar panels with a battery storage system are plentiful. For starters, solar batteries store the extra energy your solar panels produce for later use so that you can make the most of your solar energy system’s output. This helps you save more money by significantly reducing your electricity bills.
The advantages of coupling photovoltaic panels with a battery storage system are abundant. A battery storage system attached to your solar panels permits you to make the most of your solar system’s output and save money on energy bills. This is possible because the battery stores the extra energy the solar panels produce that you can use later. Furthermore, you can become energy independent by pairing a battery with solar, thus creating your own mini utility. Lastly, in regions where local utilities don’t offer net metering, you can use the battery storage system to store solar energy for use at night and during periods of minimal sunlight.
Conclusion
The Inflation Reduction Act of 2022 expanded the solar tax credit to include batteries installed in a taxpayer’s residence in the United States. To qualify for the 30% tax credit, the battery storage capacity must exceed 3 kWh. This tax credit is available now and will remain in effect for the next ten years.
Investing in solar and battery storage is a long-term investment, so the sooner you act, the sooner you’ll start to reap the rewards. With the expanded solar tax credit, taxpayers can reduce their tax liability up to 30% and carry forward the unused portion for later use. Don’t miss out on this opportunity to save on your taxes and contribute to cleaner energy!
