Overview of the Residential Clean Energy Credit for Battery Storage
The Residential Clean Energy Credit, also known as the Section 25D credit, provides homeowners in the United States with a tax incentive for investing in renewable energy systems, including battery storage technology. Here’s how it works specifically for battery storage:
Eligibility Requirements
- Battery Capacity: The battery storage technology must have a capacity of at least 3 kilowatt hours to qualify for the credit.
- Installation Location: The battery system must be installed in connection with a dwelling unit located in the United States and used as a residence by the taxpayer.
- Standalone Batteries: Starting January 1, 2023, standalone batteries that are not connected to solar panels also qualify for the credit.
Credit Details
- Credit Percentage: The credit covers 30% of the cost of eligible battery systems installed between 2022 and 2032. The credit rate will decrease to 26% in 2033 and 22% in 2034, before expiring in 2035.
- Credit Limitations: There is no annual or lifetime dollar limit for battery storage under this credit, making it uncapped.
- Non-Refundable: The credit is non-refundable, meaning it can only reduce your tax liability and cannot result in a refund if it exceeds your liability. Excess credits can be carried forward to future years.
How to Claim the Credit
- Form to Use: The credit is claimed by filing Form 5695, Residential Energy Credits, with your tax return.
- Claim Year: You must claim the credit for the tax year when the property is installed, not when it is purchased.
- Eligible Costs: Eligible costs include the purchase and installation costs of the battery system.
Additional Considerations
- Addition to Existing Solar Systems: If you add battery storage to an existing solar system, you can claim the Residential Clean Energy Credit for the battery installation.
- Renter Eligibility: Renters may also be eligible for this credit if they own and install the battery system in their rented home. However, landlords cannot claim the credit for rental properties they do not live in.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-residential-clean-energy-credit-work-for-battery-storage/
