How the ITC Reduces Cost of Whole Home Battery Backup

Federal Tax Credit (ITC)
The ITC and Solar Storage

Affordable solar storage has become even more vital for residential solar installations, given declining net metering returns and utility policies. 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. Because of the 2020 tax extension, as of 2021, it covers 26 percent. However, in 2023 it will decrease to 22 percent. By 2024, this incentive will disappear for residential applications and stay at 10 percent for commercial applications.

Residential Storage and the ITC

While batteries on their own aren’t renewable energy, when renewable energy charges them, such as solar, the ITC includes energy storage in the credit. As of 2021, the ITC will cover 26 percent of owned solar and storage added to homes. Solar homes have to charge 100 percent of the home battery to qualify for the full tax credit.

Adding Commercial Storage

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 the cost. A home battery typically costs between $5,000 and $10,000 per battery

Battery storage installed during 2021 can receive up to 26 percent, resulting in savings between $1,300 and $2,600. These savings make adding solar storage an investment worth considering. Individuals with small businesses run from their home office can benefit even more by combining the ITC with the MACRS.

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 starts a payment program. 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. In the year following your install, you can go through our ITC step-by-step guide to start the process.


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