To be eligible for the federal tax credit for energy storage systems, such as battery storage technology, the following requirements must be met:
- Capacity Requirement: The energy storage system must have a capacity of at least 3 kilowatt-hours (kWh) to qualify.
- Installation Period: The system must be installed and put into service between December 31, 2021, and January 1, 2033, to be eligible for the highest available tax credit rate, which is 30%. After 2032, the credit rate begins to phase down.
- Location and Use: The energy storage system must be installed in a dwelling unit located in the United States and used as a residence. This can include principal residences and second homes, but not rentals.
- New Equipment: The property must be new and previously unused. Used or pre-owned equipment does not qualify.
- Claiming the Credit: The Residential Clean Energy Credit can be claimed using IRS Form 5695 for the tax year in which the property is installed. The credit is nonrefundable, meaning it can only reduce the amount owed in taxes, but any excess can be carried forward.
- Eligible Costs: Qualified expenses include the costs of the energy storage system itself and related labor for installation.
- Credit Percentage: The credit is 30% of the qualified costs for installations placed in service between 2022 and 2032. It will decrease to 26% in 2033 and 22% in 2034.
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