The Inflation Reduction Act of 2022 (IRA) has significantly expanded tax credits for energy storage, offering substantial incentives to both residential and commercial sectors.
Key Developments
Residential Sector
- Section 25D Credit: Homeowners can claim a 30% tax credit for standalone energy storage systems of 3 kWh or greater, regardless of whether they are installed with solar panels. This credit is available until December 31, 2032, and will decrease to 26% in 2033 and 22% in 2034 before expiring.
- Eligible Expenditures: The credit applies to the costs of equipment and labor for installing the energy storage system in a residential dwelling.
Commercial and Industrial Sector
- Section 48 and 48E Credits: The IRA introduces a technology-neutral investment tax credit (ITC) for standalone energy storage facilities under Section 48E, applicable to projects placed in service after December 31, 2024. This extends the ITC eligibility to include energy storage, with requirements similar to those for other renewable energy projects.
- Domestic Content Requirement: Energy storage projects that meet a domestic content requirement can receive an additional 10% ITC, effective for projects placed in service after December 31, 2022.
- Production Tax Credits: The IRA also includes production tax credits (PTCs) and advanced manufacturing credits under Section 45X, which benefit the production of clean tech equipment, including energy storage systems.
- Transferability and Direct Payment: The IRA allows for the transferability and direct payment of tax credits, enhancing the financial attractiveness of energy storage projects by providing more flexible financing options.
Overall, these changes have bolstered the energy storage industry by providing significant financial incentives and streamlined financing options, helping to drive the adoption of clean energy technologies in the United States.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-have-tax-credits-evolved-under-the-inflation-reduction-act-of-2022-for-energy-storage/
