How the ITC Reduces Cost of Whole Home Battery Backup

Federal Solar Tax Credit
The ITC and Solar Storage

Affordable solar storage has become even more vital for residential solar installations, given declining net metering returns and policies from utility companies. Thankfully some headway on this front has made solar storage an option for more solar homeowners. 

While most think of the solar tax credit as a credit that helps reduce the price of solar arrays, it can also significantly decrease the cost of solar storage. Customers who already have solar or who add solar storage at the same time can receive the ITC for their storage installation.

A Federal Tax Credit for Battery Storage

The ITC covers a percentage of the cost to add renewable energy to residential or commercial applications. As of 2020, it covers 26 percent. However, in 2021 it will decrease to 22 percent. Then in 2022, this incentive will disappear for residential application and stay at 10 percent for commercial applications. 

Residential Storage and the ITC

While batteries on their own aren’t renewable energy, when they charge with renewable energy like solar, the ITC includes them in the credit. As of 2020, the ITC will cover 26 percent of solar and storage added to homes that will have solar or already have it. These homes have to produce 100 percent of the power needed to charge the batteries to qualify for the tax credit.

Adding Commercial Storage

For commercial installations, however, there’s a little more leeway. Commercial solar arrays can produce as little as 75 percent of the storage system and qualify. If the solar or other renewable energy source charges less than 100 percent, the ITC for the unit decreases.

Calculating the Savings of the Battery Storage Tax Credit

How much a solar array will save depends on when the installation took place and how much it costs. A home battery typically costs between $5,000 and $10,000 per battery

Battery storage installed during 2020 can receive up to 26 percent, resulting in savings between $1,300 and $2,600, not including the savings from the installation of the solar array. These savings make adding storage an investment worth considering. 

Individuals with home offices can benefit even more by combining the savings of the ITC with the MACRS. If you’re a small business owner with the main office in your home, you could save even more.

How to Take Advantage of the Energy Storage Investment Tax Credit

To get the ITC, the individual needs to own the system, meaning the customer either pays in cash or gets on a payment program for it. Leased systems do not offer any tax benefit to the homeowner. Instead, these benefits go to the solar company that owns the solar array. 

After the solar array and storage go in, customers need to make sure they file for their tax credit. The year following your install, go through our ITC step-by-step guide to start the process.

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