You may have heard, or read, about the solar tax credit (formally called the Federal Investment Tax Credit) last year, especially as 2019 wrapped up and before the pandemic hit. In short, this tax credit previously allowed homeowners that installed solar panels on their homes to deduct 30% of their total solar installation costs from their federal tax liability, but after 2020, that deduction amount has been reduced to 26%.
This 26% deduction was initially set to step down again to 22% when 2020 turned to 2021. However, thanks to a recent spending bill that was passed by congress and signed into law, homeowners looking to go solar can take advantage of the 26% deduction for an extra two years, and the 22% deduction will be pushed to 2023!
This is still a substantial incentive for reducing the cost of your solar installation — but many homeowners interested in outfitting their homes with a self-sufficient renewable energy system want to know: Does a solar battery backup system also qualify for the savings of the Federal Investment Tax Credit?
Combining Solar and Battery Storage
Solar battery storage systems, like the Tesla home battery product called Tesla Powerwall, are connected to the inverters and solar panels of a residential solar PV (photovoltaic) system. This allows the system to bypass the safety mechanisms that require standard solar PV systems to connect the greater electric grid.
Solar battery storage systems save all of the excess electricity that solar panels can generate during the day, and use that electricity to power a home or business after the sun has gone down, during peak charging or even during a power outage.
A solar-plus-storage system can help you maximize the renewable energy potential of your Denver, Colorado Springs, Pueblo, Aurora, Colorado or San Antonio, Austin, and Rio Grande Valley, Texas home. So how does this fit into the 2021 federal tax breaks for installing solar panels?
Reducing the Cost of Solar Plus Storage
The short answer to using the 2021 solar tax credit for battery storage? YES.
But there is a caveat!
In order to qualify, the batteries you choose (including a Tesla solar battery) must “derive 100% of (its) power from an onsite solar array”. This means you cannot be charging your batteries with grid-supplied power — which is not too hard if you are planning to use your battery storage solely with solar panels or to take your home completely off the grid!
However, the rules are a little different for commercial systems. Commercial solar PV systems are required to derive a minimum of 75% of their power from solar, on a sliding scale to be eligible. For example, a commercial solar PV system charged 100% by solar would be eligible for the full tax credit of 26%. However, if it is only charged 75% of the time by solar, it would be eligible for 75% of the tax credit, which pencils out to 19.5%.
Don’t Miss a Penny of Savings When You Go CAM Solar
Looking for other available savings outside of the federal solar tax credit in Texas or Colorado? Your commercial system may qualify for 7-year or 5-year MACRS depreciation, manufacturer and utility rebates, and more. The best way to ensure you get the maximum savings out of your solar installation is by trusting the experts at CAM Solar!
We have been in the solar game for decades, and have seen the ins and outs of these savings incentives and programs. We will help design a solar-plus-storage system tailored to your unique needs, and make sure you understand the process from beginning to end.
Looking to save on the cost of installing your solar-plus-storage system? Get a free quote by calling 210-227-3456 or you can contact us here.
*DISCLAIMER: While this blog post discusses solar tax credits and filing your returns, you should ALWAYS consult your tax professional for your specific situation. We do not assume responsibility for your tax situation or credits.