The Bipartisan Budget Act of 2018 reinstated the tax credit for fuel cells, small wind, and geothermal heat pumps with a gradual step down in the credit value.
You may claim a 30% credit of qualified expenditures for a system that serves a residential dwelling that you own and use as a residence. Expenditures occur when installation is complete. If the installation is at a new home, the "placed in service" date is the date of homeowner occupancy. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds the tax liability, the excess amount may be carried forward.
Tax Credit for Energy Storage with PV Systems
Stand-alone energy storage systems do not qualify for the tax credit. However, IRS issued Private Letter Rulings in 2013 and 2018, which address energy storage paired with photovoltaic (PV) systems, ruled that the energy storage equipment when paired with PV met the statutory definition of a "qualified solar electric property expenditure," and is eligible for the credit. Private Letter Rulings only apply to the taxpayer who requested it, and do not establish precedent. So, if you are considering the purchase of an energy storage system, talk with us before claiming a tax credit.
History of the Residential Renewable Energy Tax Credit
The 2005 federal tax credit for residential energy property initially applied to solar-electric systems, solar water heating systems, and fuel cells. It was extended in 2008 to small wind-energy systems and geothermal heat pumps. Other key revisions included an eight-year extension of the credit to December 31, 2016; the ability to take the credit against the alternative minimum tax; and the removal of the $2,000 credit limit for solar-electric systems beginning in 2009. The credit was further enhanced in February 2009 by removing the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.