This article is reproduced with permission from Spidell Publishing, Inc.
The IRS has ruled that a home battery used to store power generated by a taxpayer’s rooftop solar panels qualifies for the 30% solar energy credit under Internal Revenue Code Section 25D. In the IRS’s ruling, home batteries can qualify for the 30% solar credit even if they are installed years after the solar panels and do not generate solar power (they are merely integrated into an existing solar energy system).
The ruling is great news for taxpayers with existing solar energy systems who want to add a home battery to store their own solar power in case of a power outage or to simply go “off the grid” altogether. With the cost of most home batteries starting at more than $5,000, the credit can provide real savings.
Components and installation qualify
The IRS’s ruling permitted the taxpayer to claim the 30% solar energy credit for the following expenditures associated with the home battery:
- An AC battery.
- An inverter that converted solar electricity between AC and DC so that the battery can charge and discharge the solar electricity.
- Required wiring to interconnect the production of the taxpayer’s existing solar energy system components and the taxpayer’s home.
- A software management tool that monitors and controls the charging and discharging of energy.
- Labor costs that are properly allocable to the onsite preparation, assembly, and installation of the home battery.
Some requirements must be met
The key parts of the IRS’s ruling that must be met in order to claim the 30% solar energy credit for a home battery are:
- The home battery and its components must be integrated into the home solar energy system. Without this requirement, the battery is not considered a “qualified solar electric property expenditure.”
- Monitoring software is only considered part of the qualified solar electric property so long as it is required in monitoring the charging and discharging of solar energy.
- All energy that is used to charge the battery must be effectively assured to come from the home’s solar energy system.
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