Does Battery Storage Qualify for the Federal Investment Tax Credit?
Dec. 29, 2020
The Federal Investment Tax Credit (also known as the ITC) is a federal tax incentive for installing solar panels on your home or business, which reduces the cost of solar installation, and will shorten the amount of time it takes to pay back your investment in solar energy. In 2021, the solar tax credit will reduce your federal taxes by 26% of your solar installation costs. But do those solar tax credit savings also apply to the battery storage systems that can be combined with a solar energy system?
Here’s everything you need to know about this solar panel tax credit in Massachusetts, and how you can further your energy independence by combining battery storage in your solar installation plans!
Solar Battery Storage: An Overview
A traditional solar PV (photovoltaic) system is actually connected to the electricity grid, so that in times of low solar productivity, your home will still have reliable electricity supplied to your outlets, lights, and appliances. This is also so that in times of excess solar production, you can receive an energy credit on your electricity bill in a process called “net metering”.
Because a solar PV system like this is connected to the grid, it will also have to shut down in the event of a power outage or blackout. This is where battery storage, like Tesla Powerwall, comes in!
By combining a properly sized solar panel array, a high-performance inverter, and a battery storage system, you will have a behind-the-meter system that will provide your home with electricity day and night, even during an outage.
Does Solar Energy Storage Qualify for the Solar Tax Credit?
Homeowners and businesses may be eligible for the Federal Investment Tax Credit on their solar PV systems, worth up to 26% in 2021 by meeting certain criteria like owning your system and not leasing. So do solar batteries also qualify for the tax credit as well? The answer is YES— but with one main condition.
According to the Solar Energy Industries Association (SEIA), in order for the cost of installing a residential solar battery system to qualify for the savings of the Solar Tax Credit, it must “derive 100% of (its) power from an onsite solar array”. This means your solar energy system, whether that’s rooftop solar or a ground-mount solar PV system, must charge your solar battery exclusively for the battery to qualify for the tax credit savings. Charging a solar battery from the electricity grid does not qualify.
However, this is slightly different for commercial systems. Commercial solar PV systems that make use of solar batteries will still qualify as long as 75% of their power is derived from solar generation. The value of the tax credit would then be based on the percentage of power derived from renewable energy. For example, if your business’ solar PV system charged the solar battery 100% of the time, you would be eligible for the full tax credit of 26% in 2021. If the solar battery was only charged 75% of the time by your solar PV system, you would be eligible for 75% of the 26% tax credit, which would give you a 19.5% tax credit on your solar battery system installation costs. BONUS - your commercial solar battery may also qualify for a 7-year or 5-year MARCS depreciation, meaning more solar savings!
When Does The Federal Solar Tax Credit End?
With the new extension, the Federal Investment Tax Credit is set to end for residential systems at the end of 2023. There will still be a tax credit for commercial systems in 2024, locked in at 10% indefinitely. Installing solar plus storage sooner rather than later can secure the savings of this tax credit, and a lower payback period.
Can A Solar Battery Be Installed On An Existing System?
If you already utilize solar in your Massachusetts home, and are taking advantage of the tax credit you may still be in luck if you are looking to add battery storage. Boston Solar can help you determine if your system is set up to allow for aftermarket solar battery installation. As long as battery installation has occurred less than one year from the initial installation of the solar panels, you may still qualify for the 2021 26% incentive from your tax liability.
More Than One Way To Save with Boston Solar
Looking for other solar tax credits in Massachusetts? There is still a $1,000 state tax credit, solar battery incentives through the Connected Solutions program, as well as SMART incentives that will generate real income for the next ten years. Boston Solar is here to ensure your solar PV system installation is primed for success from the get-go.
As the number one Massachusetts based solar installer with more than 4,400 solar installations, we will make sure your system is designed to provide the maximum amount of renewable energy for your home, and that you properly qualify for the 2021 tax credit for solar panels, as well as any battery storage system you choose to include in your solar installation plans.
*DISCLAIMER: While this blog post discusses solar tax credits and filing your returns, you should ALWAYS consult your tax professional for your specific situation. We do not assume responsibility for your tax situation or credits.
Get backup power for less by using the 26% Federal Solar Tax Credit in 2021 for your solar battery storage installation. Get a free quote by calling 617-858-1645 or you can contact us here.