The tax credits for energy storage and solar systems have some similarities, particularly under the Residential Clean Energy Credit, but they also have differences in terms of eligibility criteria, historical context, and application.
Similarities
- Residential Clean Energy Credit Rate: Both energy storage and solar systems qualify for the same rate under the Residential Clean Energy Credit, which is 30% of the qualified costs from 2022 to 2032. This rate phases down to 26% in 2033 and 22% in 2034.
- Eligibility: Both types of systems must be installed in a dwelling unit located in the United States, and both principal residences and second homes are eligible.
- Non-refundable: Both credits are non-refundable, meaning they can reduce tax liability but not generate a refund if the credit exceeds the tax owed.
Differences
- Historical Context:
- Solar Systems: Solar systems have historically qualified for tax credits with various rates over the years. The current 30% rate for solar installations from 2022 to 2032 is part of an expanded incentive to encourage renewable energy adoption.
- Energy Storage: Prior to the Inflation Reduction Act (IRA) in 2022, energy storage was eligible for tax credits primarily if it was installed with solar systems. Beginning in 2023, standalone energy storage (with a minimum capacity of 3 kWh) became eligible for the 30% Residential Clean Energy Credit.
- Stand-alone Eligibility:
- Solar Systems: Always eligible for tax credits as standalone installations.
- Energy Storage: Since 2023, eligible for the 30% tax credit even without a concurrent solar installation, as long as it meets the minimum capacity requirement.
- Additional Commercial Considerations:
Energy storage projects can also benefit from the Investment Tax Credit (ITC) under Section 48, offering a base rate of 6% and a bonus rate of 30% if specific requirements are met, such as prevailing wage and apprenticeship requirements. Solar systems also benefit from the ITC, but energy storage can be considered standalone for these credits.
In summary, while both solar systems and energy storage qualify for the Residential Clean Energy Credit at the same rate, the eligibility criteria and historical context differ. Energy storage has become more inclusive for standalone installations since 2023, mirroring solar in this aspect but still operating under different commercial incentives.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-tax-credit-for-energy-storage-differ-from-that-for-solar-systems/
