Potential Tax Credit for Solar Energy Storage Retrofit
Good news for homeowners who are considering adding a battery storage system to their existing solar energy systems in the future. Not only will they be able to guard against power outages by utilizing their stored energy from their rooftop solar, but their retrofit may even be eligible for a tax credit.
The IRS ruled that under Code Sec 25D(d)(2), the battery was a “qualified solar electric property expenditure” along with labor costs for site preparation, installation and interconnecting per Code Sec 25D(e)(1) and eligible for the tax credit. It was also determined that the taxpayer was eligible for this tax credit as the battery was qualifying property (based on the grounds that it stores 100 percent solar-generated energy). Just as the rooftop PV system installed in an earlier year was qualifying property.
In order to be considered a qualified solar property expenditure, the battery storage system must use only solar energy to generate electricity.
Although the IRS’ private letter ruling only applies to the requesting taxpayer and stated it does not set a precedent, there exists the potential for taxpayers with residential solar systems already installed to claim the federal Investment Tax Credit (ITC) for solar battery system retrofits. This also provides guidance, albeit not authoritative, to nonresidential battery storage projects. But, time is of the essence.
The ITC remains at 30 percent for begun residential construction through 2019, but in 2020 reduces to 26 percent, and in 2021 to 22 percent, which still helps to somewhat offset the homeowner’s expense of the qualifying property.
According to Greentech Media, “Adding batteries to residential solar systems remains an expensive proposition, the price drops of lithium-ion batteries has helped. Median system prices stood at $2,900 per kilowatt-hour in the first quarter of 2018…”
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