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jes49
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Slowly built a solar/battery system over 3 years. Question about when I have to claim credit under Residential Energy Credit?

In 2022, I purchased two solar generators, each having 1024 kWh capacity.  Solar panels were also purchased.  I also had an electrician install a manual transfer switch and a local government who permitted it in November.  I started to use the system in the new year, 2023.

In 2023, I purchased a larger solar generator, having 2048 kWh power capacity.   

In 2024, I purchased an Extra Battery for the 2023 listed above, having 2048 kWh power capacity.  

 

I have not applied for a Residential Energy Credit for any of these expenses.   What is the best approach?   Put the entire expense on my 2024 taxes or list each separately.   Note, I did not have "system" capacity of over 3 kWh until 2023.

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Slowly built a solar/battery system over 3 years. Question about when I have to claim credit under Residential Energy Credit?

Each year is separate.  You claim a credit for a specific piece of equipment (if it is eligible) in the year the original installation was completed.  This means installed, inspected and ready to use.  

 

However, we have to analyze which parts of your system might qualify.

 

Firstly, I am seeing small solar generators that are 2048 watt-hours, that is NOT 2048 kilowatt hours.  2048 watt-hours is 2kWh.  The average US home uses 30kWh per day (3000 watt-hours), so a 2000 watt-hour system would power a typical home during the day.  A 2000 kilowatt hour installation would power a large neighborhood and be a commercial or industrial size.  I will assume you mean 2kWh for the rest of my answers. 

 

"Solar generators" and solar panels are only allowed if they supply a "dwelling" where you live at least some time.  They don't qualify if they feed a barn or other structure, or if they feed directly into the grid (they can also connect to the grid but they must mainly be to power a dwelling).  If the 2022 system feeds a dwelling, it sounds like you would claim it on your 2022 return, if it was installed, permitted and operable.  You would have to file an amended 2022 return to claim the credit.   You can include the cost of installation including the transfer switch.   There is no requirement for minimum system size in 2022, as long as the system uses the sun to provide power to a dwelling.  

 

For 2023, I don't know what a "generator" is, as distinct from solar panels or a solar system.  If this is part of a system that gives you better conversion from the existing panels, it would fall under the same rules, it must provide power to a dwelling that you live in at least some times.  You would claim the cost on your 2023 tax return.  There is no requirement for minimum system size in 2023, as long as the system uses the sun to provide power to a dwelling.  

 

For 2024, the battery is not eligible.  Due to modifications in the Inflation Reduction Act, batteries are only eligible if they are 3kWh or more.  This change does two different things, one good and one bad (in your case).  The good thing is that it allows for battery installations that are not part of a solar system -- for example, if you want to time-shift by buying grid power during off-peak times so you can use it at peak times.  Before the IRA, this was not eligible for any credits, only batteries that were connected to a solar system were allowed.  However, the IRA also added a minimum capacity requirement.  If you bought a new solar system that was eligible, any battery would qualify as part of the system, but because you bought a standalone battery, it is not eligible unless 3kWh or more. 

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