Let’s look at the federal tax credit and how your battery storage installation is affected by it.

Is solar power required to qualify for the tax credit when a battery is used?

Batteries installed before December 31, 2022, must be linked to solar panels and charged only by solar energy to qualify for the federal tax credit.

As a result of the Inflation Reduction Act’s passage, batteries will no longer require solar panels to be eligible for the tax credit as of 2023. As a result, both independent battery systems and battery systems that are combined with solar panels will qualify for the tax credit.

What happens if you upgrade an existing solar panel system with a battery?

If you install a battery and link it to solar panels already mounted on your roof, you may still be eligible for the tax credit. The specifics of this situation are unknown, but according to an IRS judgment from 2018, battery storage can receive the tax credit even if it is added after solar panels as long as it is powered entirely by solar energy.

The 100% solar energy requirement will only apply to batteries deployed after 2023.

Can you utilize additional battery storage incentives in addition to the tax credit?

Yes, even if you use additional energy storage incentives, you can still qualify for the federal solar tax credit. The available incentives will vary by area and can be provided by utility providers, state and municipal governments, or both.

If the incentive reduces the installation’s upfront cost, the tax credit will be calculated based on the system’s cost after the other motivation has been considered. Assuming you reside in California, install a battery system costing $10,000 and qualify for the state’s SGIP battery incentive program to receive a $1,500 rebate. Your tax credit would be worth $8,500, the price after the SGIP incentive.

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