Eligibility for tax credits on energy storage projects varies depending on whether they are residential or commercial/industrial. Here are the eligibility requirements for each category:
Residential Energy Storage Tax Credits
- Capacity Requirement: Battery storage must have a capacity of at least 3 kilowatt-hours.
- Installation Timing: The tax credit rates vary based on when the property is placed in service. For example, a 30% credit applies from 2022 to 2032, then it reduces to 26% in 2033 and 22% in 2034.
- New and Unused Property: Eligible battery storage must be new and previously unused.
- Labor Costs: Qualified expenses include the cost of new clean energy property and labor costs for installation.
- Eligible Properties: The home must be in the United States and used as a residence by the taxpayer, including principal residences and second homes.
Commercial/Industrial Energy Storage Tax Credits
- Investment Tax Credit (ITC): Energy storage projects can qualify for an ITC on a standalone basis, which is a significant change introduced by recent legislation.
- ITC Rates: The base ITC rate is 6%, and a bonus rate of up to 30% is available if the project meets prevailing wage and apprenticeship requirements or has a capacity below 1 MW.
- Refundable ITC for Tax-Exempt Entities: For tax-exempt entities, such as state and local governments, the ITC can be refundable.
- Domestic Content Requirements: Projects starting construction after 2023 must meet domestic content requirements to avoid reduced credits, especially for those over 1 MW.
- Environmental Justice Adders: Additional credits may be available for projects located in low-income communities or on Indian land, though standalone energy storage does not qualify for these adders.
These requirements help guide the application for tax credits for energy storage projects across different scales and ownership structures.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-eligibility-requirements-for-energy-storage-projects-to-qualify-for-tax-credits/
