2019: The Last Year to Access the Full 30% ITC

Since its inception in 2005, the federal solar investment tax credit (ITC) has enabled homeowners and businesses to save thousands of dollars on their solar+storage systems across the U.S. However, lawmakers have established a “step-down” schedule to drop the tax credit for business to a permanent 10 percent, and phase out the residential credit entirely by 2022.

Current and future solar energy system owners only have until December 31, 2019 to take advantage of the full 30% ITC for both solar and energy storage investments. On January 1, 2020, the tax credit falls to 26%.

It is important to note that commercial customers can lock in the 30% ITC by commencing construction before December 31 – which includes purchase of storage assets. For residential customers, however, the system must be fully placed in service by the December 31 deadline.*

Why invest in an energy storage system?

Storage maximizes your investment in solar generation and creates energy security for you, your family, business and community. Without energy storage to capture the power of the sun, the solar generation on your roof, whether it is a business or home, fails right along with the grid during a power outage. Rooftop solar generation flows into the grid, not your home or business, unless you have a battery system to capture and store power when you need it - long after the sun sets or during a blackout. Solar without storage means you still face the uncertainty and economic losses of a power outage.

In addition, beyond achieving critical back-up power during an outage, energy storage allows you to take advantage of daily savings by using your batteries to offset high utility rates during Time Of Use (TOU), Peak or Demand Charge hours.  Discharging your batteries to power your electrical loads during these high rate hours stands to save you substantial money on a daily basis, further maximizing your investment into solar + storage for your home or business.

What is the ITC?

The ITC is one of the best financial incentives for solar & energy storage in the U.S. Under Section 25D of the ITC, homeowners who purchase solar energy systems outright can deduct 30% of the cost of the system from their federal income taxes. Businesses that install, develop and/or finance the project can claim the 30% credit under Section 48 of the ITC. Significantly, there’s no cap on the value of the credit.

The main requirement for ITC eligibility to keep in mind is that you must own your solar energy system (rather than lease it from a third-party provider). Notably, in the event you don’t have enough tax liability to claim the full credit in one year, you can simply “roll over” the remaining credits into future years for as long as the tax credit is in effect.

The ITC Step-Down

2019 is the final year to take advantage of the full 30% tax credit! Starting in 2020, the ITC steps down to 26%. In 2021, the final year that homeowners can use the ITC, the ITC will be stepped down further to just 22%. Starting in 2022 and lasting indefinitely, the ITC will be just 10% and will only be accessible for commercial and utility solar projects.

How can the ITC be used for energy storage?

Since a battery isn’t considered renewable energy, as it can also be charged by grid electricity, energy storage systems are only eligible for the ITC if they are charged by renewable energy.

• Residential Eligibility
  Homeowners looking to receive the 30% ITC for their energy storage systems may do so as long as the battery is only charged by on-site solar or other renewable energy. If the homeowner doesn’t have solar panels installed, and plans to charge the battery with electricity from the grid, the project isn't eligible for the 30% ITC.
• Commercial Eligibility
  Unlike homeowners, businesses are eligible for their energy storage systems if their batteries are charged with renewable energy at least 75% of the time, rather than 100% of the time. The exact value of the ITC for energy storage in commercial projects depends on how often the battery is charged by renewable energy. In order to receive the full, 30% credit, the energy storage system must be charged by renewable energy 100% of the time. For energy storage that is only charged by renewable energy 75-99% of the time, the ITC is adjusted accordingly. For example, a battery that is charged by solar 80% of the time is eligible for 80% of the 30% ITC – equivalent to a 24% credit (80% x 30% = 24%). If this battery costs $5,000 to install, it would be eligible for a $1,200 tax credit ($5,000 x 24% = $1,200).

In November 2019, the House Ways and Means Committee released a comprehensive clean energy tax package that includes a five-year extension of the 30% solar Investment Tax Credit (ITC) and new incentives for energy storage. It remains to be seen whether congress will approve the proposed extension, but SimpliPhi will keep our readers up to date as we continue to track the latest policy developments.

To be sure to realize the full 30% tax benefit for your energy storage plus solar project, don’t wait! Contact a SimpliPhi representative today.

*Any taxpayer considering the purchase of an energy storage system should consult their accountant or other tax professional before claiming a tax credit.