Battery storage tax credit, solar tax credit, residential clean energy credit,… you’ll find these terms everywhere online when you want to learn about sustainable energy tax credits. However, using these unofficial names can cause some confusion.
Battery storage tax credit and solar tax credit fall under the same legislation: “The residential clean energy credit”.
The residential clean energy credit is the only official name. It has emerged as one of the most impactful incentives for homeowners looking to adopt renewable energy technologies.
From solar panels to home battery systems, this federal tax credit can help reduce the cost of energy solutions that promote sustainability. However, some elements of the tax credit are rather vague and open to interpretation.
In this guide, we’ll try to cover everything you need to know about the Residential Clean Energy Credit and its application to home battery systems, including portable power stations.
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DISCLAIMER: we are not tax professionals. The info poweroffgrid.com provides below is for educational purposes only and should not be considered as legal advise. Nor does it guarantee the eligibility of your case. Consult a tax professional to evaluate your eligibility.
What Is the Residential Clean Energy Credit?
The Residential Clean Energy Credit is a federal tax incentive designed to encourage the adoption of renewable energy systems in homes. The credit allows homeowners to claim up to 30% of the cost of eligible systems installed from 2022 through 2032. After 2032, the credit percentage will gradually decrease.
Eligible Systems Include:
- Solar energy systems (e.g., rooftop solar panels).
- Balance-of-system equipment, including wiring, inverters, and mounting equipment
- Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees
- Home battery storage systems.
- Portable power stations with specific requirements.
This credit was expanded under the Inflation Reduction Act (IRA) of 2022, making it more accessible for various energy solutions, such as energy storage devices.
How the Residential Clean Energy Credit Applies to Home Battery Systems & Portable Power Stations
Standalone Battery Storage Systems
With the IRA, battery systems no longer need to be paired with solar panels to qualify. Home battery systems or portable power stations that store at least 3 kilowatt-hours (kWh) of energy can qualify for the 30% tax credit, whether they are used as standalone storage or integrated with other systems.
Key Details:
- Capacity Requirement: Minimum 3 kWh.
- Usage: Batteries can be charged via the grid, renewable energy systems, or both.
- Examples: Tesla Powerwall, LG Chem RESU.
This makes standalone battery systems ideal for homeowners looking to improve energy resilience or optimize their electricity use during peak rate periods.
Portable Power Stations and Solar Integration
Portable power stations can also qualify for the Residential Clean Energy Credit, but they must meet specific criteria:
- Solar Compatibility: The power station must support charging via solar panels (i.e., have solar input capability).
- Capacity Threshold: Must have a battery capacity of at least 3 kWh.
Key Clarification:
- Solar panels do not need to be installed or connected at the time of purchase for the power station to qualify, but the device must be solar-compatible.
- Power stations without solar compatibility are not eligible, even if they exceed the 3 kWh capacity requirement.
Examples of eligible systems include large portable power stations like the EcoFlow DELTA Pro or Bluetti AC500 when paired with or capable of being paired with solar panels.
Solar-Powered Systems
For homeowners with rooftop solar installations, batteries integrated with solar panels automatically qualify for the tax credit. These systems allow for the storage of excess solar energy for use during non-sunny hours, increasing the overall efficiency of the renewable setup.
Overview of All the Requirements
1. The Property Must Be Your Primary or Secondary Home
- The system must be installed at your main home or second home in the United States.
- Rental properties and other business-use properties do not qualify for the credit.
2. System Must Be Installed and Operational
- The energy system must be installed and ready for use during the tax year in which you claim the credit.
- Prepaid purchases for systems that have not yet been installed do not qualify.
3. Taxpayer Must Own the System
- The taxpayer must own the energy system outright.
- Systems leased or rented (such as solar leasing agreements) do not qualify for the tax credit.
4. Eligible Expenses
The tax credit applies only to eligible expenses directly related to the purchase and installation of the energy system, including:
- Cost of equipment (e.g., batteries, inverters, portable power stations, solar panels).
- Labor costs for on-site preparation, assembly, or installation.
- Permitting fees and inspection costs.
- Previously owned clean energy systems are not eligible.
5. Minimum Battery Storage Capacity
- For battery systems (stationary or portable), the minimum storage capacity must be 3 kWh.
- Batteries smaller than 3 kWh are excluded, regardless of other features.
6. Solar Compatibility for Portable Power Stations
- Portable power stations must be solar-compatible, meaning they are capable of being charged with solar panels.
- Solar panels themselves do not have to be installed or in use at the time of the claim.
7. Installation Timing
- The system must be installed between January 1, 2022, and December 31, 2032, to qualify for the current 30% credit.
- The credit percentage will decrease to 26% in 2033 and 22% in 2034 before expiring unless extended.
8. Supporting Documentation
- To claim the credit, taxpayers must provide proof of eligibility, including:
- Receipts or invoices for the equipment and installation costs.
- Certification from the manufacturer or retailer that the system qualifies under the credit.
9. Must Be a Residential System
- The system must be for residential use only.
- Systems used for commercial or industrial purposes are not eligible for the Residential Clean Energy Credit (though they may qualify for separate business credits).
10. Must Be for Renewable Energy Use
- The system must serve a renewable energy purpose, such as storing solar-generated electricity or acting as a backup during outages.
- Systems purely used for recreational or non-renewable energy storage (e.g., charged exclusively from the grid without solar compatibility) are not eligible.
How to Claim the Residential Clean Energy Credit
Verify that your battery or portable power station has a capacity of 3 kWh or more. Confirm solar compatibility for portable power stations. Look for certifications or documentation from the manufacturer to prove compliance.
Save all receipts and proof of purchase. Obtain manufacturer documentation verifying that the system qualifies under IRS guidelines.
Use IRS Form 5695 (Residential Energy Credits) to claim the credit on your federal tax return. Include all required information, including system costs and supporting documentation.
If you’re unsure about eligibility or how to complete the tax credit application, consult a tax advisor. Misfiling can result in delays or denials of the credit.
Comparing Home Battery Systems Under the Credit
| Feature | Home Batteries | Portable Power Stations |
|---|---|---|
| Solar Compatibility Required? | No | Yes |
| Minimum Capacity | 3 kWh | 3 kWh |
| Mobility | Fixed installation | Portable, mobile |
| Examples | Tesla Powerwall, LG Chem RESU | EcoFlow DELTA Pro, Bluetti AC500 |
FAQs: Residential Clean Energy Credit and Battery Systems
Does a portable power station need solar panels connected to qualify?
No, it does not need solar panels connected, but it must have the capability to integrate with solar panels.
Can I claim the credit for a battery smaller than 3 kWh?
No, systems smaller than 3 kWh do not qualify, regardless of their features or compatibility.
Is there a cap on the credit amount?
No, there is no cap on the amount you can claim under the Residential Clean Energy Credit. However, the tax credit can not be higher than the tax paid.
Can I claim the credit for a system installed in a previous year?
You can only claim the credit for systems installed in the current tax year for which you are filing, as long as they meet the eligibility criteria.
Can I combine multiple portable power stations to meet the “no less than 3kWh” rule?
This isn’t specified by the official sources. In order to pass a possible audit we would advise to only claim the tax credit for portable power station models that have 3kWh capacity or more.
Should the battery generator be installed by a certified professional?
This is also open to interpretation. The legal text says the following:
(6)Qualified battery storage technology expenditure The term “qualified battery storage technology expenditure” means an expenditure for battery storage technology which—
(A) is installed in connection with a dwelling unit located in the United States and used as a residence by the taxpayer, and
(B) has a capacity of not less than 3 kilowatt hours.
Hence, what “installed” includes or really means is unclear. Again, to be more sure you would pass an audit it’s advisable that you let a certified electrician connect the portable battery generator to your home electric circuit. That way you’ll have documentation of the installation and the labor costs involved are eligible for the tax credit as well.
Should the portable power station be connected to the grid?
It depends if you consider it as a solar energy system or a battery energy system. Before the IRA you could only make a claim to the tax credit if you considered a portable power station as a solar energy system.
Hence, it needed to be connected to solar panels but not necessarily to the grid.
If you look at it as a battery energy system, it is probably necessary to connect it to the grid.
Why Take Advantage of the Residential Clean Energy Credit?
With energy costs on the rise and power outages becoming more common, investing in renewable energy systems like home batteries and portable power stations is a smart choice. The Residential Clean Energy Credit not only makes these systems more affordable but also contributes to a cleaner, more sustainable future.
By understanding the eligibility requirements and how to claim the credit, you can maximize your savings and enjoy the benefits of renewable energy technology.
Sources:
- Homeowners guide to federal Tax
- Residential Clean Energy Credit
- Federal Tax Credits for Energy Efficiency
- Legislation text
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