Federal tax credit for solar battery backup?

[proudapron]

Hi there!

I heard that there are some instances when people could deduct a solar battery backup system. There's a lot of conflicting information online about this, so I'd like to hear from an expert on this.

Can someone get the solar tax credit for a battery bank, and if so, what are the requirements to be eligible? I'm asking for the 2021 tax year, not 2020 (I would install this year).

Thanks!

[MinhT1 · Accepted solution]

A solar battery backup system can be claimed as the solar tax credit known as the Federal Investment tax credit (FITC).

The amount you can claim is proportional to how often the battery is recharged from a renewable source. If you are charging your batteries from solar 90% of the time, you can claim 90% of the cost of the battery under the credit.

And in 2021, the credit is equal to 22% of the amount of investment you can claim.

[proudapron]

Thanks so much! I thought the 26% federal rebate got pushed out through 2022 just a few months ago? Is that not accurate? I haven't researched it yet, just heard it from a friend.

[dharmacs]

I work in the solar world, covering Utah, Colorado, and other western states. All across the country, this is TRUE that the 26% credit has been decided to stay through 2 extended years.  We can connect if you live in one of these states for more information.

[greglovelace]

Can anyone tell me what form is used to claim this credit for solar batteries?

[ColeenD3]

@greglovelace You would use Form 5695.

1. In TurboTax, search for energy improvements. (Don't search for energy credit as this will take you to the wrong place.)
2. Click the Jump to link in the search results.
3. At the bottom of the Energy-Saving Home Improvements screen, answer Yes and continue. Follow the instructions.
   1. Page 1 of the interview covers solar, geothermal, wind, and fuel cell. If you're looking for other improvements, like doors, windows, furnace, air conditioning, or heat pump, just keep going to the next page.

[taxPayer9001]

Battery storage is only eligible for the full FITC when charged only with solar energy. In the classic sense, this would mean solar panels on the roof of the same house.

Things are starting to change a bit in California with some utility providers offering a 100% solar energy plan, where they promise all power a customer receives from the grid will be solar. My novice interpretation of the law says that, in this case, the customer should be able to claim all 100% of the FITC for battery storage without also installing solar, so long as they're subscribed to a 100% solar energy rate plan.

Does that sound right?

[AmeliesUncle]

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@taxPayer9001 wrote:

the customer should be able to claim all 100% of the FITC for battery storage without also installing solar, so long as they're subscribed to a 100% solar energy rate plan.

Does that sound right?

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No, it would need to be charged directly by solar.

And despite what your electric company says, your house is not powered by 100% solar.  They don't have separate power lines only for solar, so all electricity from the electric company comes from a mixture of sources - coal, nuclear, solar, wind, hydroelectric. 

[KrisD15]

@taxPayer9001

To further expand on the answer from @AmeliesUncle

According to the instructions for IRS 5695-

“Extends the 26 percent residential energy efficient property credit rate to property placed in service in 2021 and 2022.”

“You may be able to take a credit of 26% of your costs of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, biomass fuel property, and fuel cell property. Include any labor costs properly allocable to the onsite preparation, assembly, or original installation of the residential energy efficient property and for piping or wiring to interconnect such property to the home. The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.”

“Qualified fuel cell property costs. Qualified fuel cell property costs are costs for qualified fuel cell property installed on or in connection with your main home located in the United States. Qualified fuel cell property is an integrated system comprised of a fuel cell stack assembly and associated balance of plant components that converts a fuel into electricity using electrochemical means. To qualify for the credit, the fuel cell property must have a nameplate capacity of at least one-half kilowatt of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%. Costs allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage don't qualify for the residential energy efficient property credit.”

Additionally, to substantiate the thought that the property would need to produce the energy, under the instructions for "Nonbusiness Energy Property Credit" it is stated that subsidized energy would not qualify which I am sure the power companies receive:

“Subsidized energy financing. Any amounts provided for by subsidized energy financing can't be used to figure the nonbusiness energy property credit. This is financing provided under a federal, state, or local program, the principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.”