New IRS requirements for battery tax credit. False alarm, please ignore.

[JoeHam]

I’m no tax expert but I believe there are a couple new rules to get the 30% tax credit for batteries.

Specifically:

The batteries must be at least 3 kWh. I don’t recall seeing that in years past.

And the most surprising one:

THE BATTERIES MUST BE 100% CHARGED BY SOLAR !

Don’t EVER use your AIO grid connection to charge or a chargeverter or a backup generator charger or…….

But, I’m not sure how they would know if you used it occasionally ?.

Here is a reference for the 3kWh requirement:

Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics

This guide provides an overview of the federal investment tax credit for those interested in residential solar photovoltaics, or PV.

www.energy.gov

And for the 100% solar charging see here :

Residential Solar Storage is Eligible for Tax Credit, Subject to a 100% Cliff

In a recently released private letter ruling (available here), the IRS confirmed that residential solar energy batteries are eligible for the tax credit

www.taxequitytimes.com

One of the most pertinent (and surprising/disturbing) paragraphs from that private letter ruling is this one :

“While some questions remain unanswered, the PLR is good news in that it confirms that subsequently-installed batteries may be eligible for the Residential Solar Credit. However, taxpayers must be careful that they can demonstrate that 100 percent of the energy used by the battery is derived from a solar source.”

 

[DIYrich]

The private letter ruling was from 2016, prior to the explicit credit for batteries.

 

[Ampster]

THE BATTERIES MUST BE 100% CHARGED BY SOLAR !

The private letter ruling was from 2016, prior to the explicit credit for batteries.

I have until recently been documenting how my batteries were charged. I recently relaxed my thinking under the impression that that was the old rule and that was no longer necessary. My last battery purchase was in 2021 and I took the tax credit that year. Until recently I have kept the logs to prove that the batteries were charged from solar. This past winter because of the weather, I charged my batteries more from the grid. I am still curious what the current rules are with respect to the need to charge from solar?

 

[JoeHam]

The private letter ruling was from 2016, prior to the explicit credit for batteries.

Again, I’m just a DIY hack who doesn’t know much about taxes or what supercedes what.

FWIW the PLR was Priv. Ltr. Rul. 2018-03-009 (Mar. 2, 2018) (the “PLR”)

 

[JoeHam]

Mea culpa, I just found this, from 2023 :

“Batteries and the federal tax credit at a glance:
Residential batteries installed in 2023 can qualify for the 30% federal tax credit, even if they aren’t attached to solar panels.
The value of the tax credit will vary depending on the equipment installed and labor costs.

The battery must be installed at the taxpayer’s residence and be owned by the taxpayer to receive the tax credit.”

Sorry for causing a kerfluffle ?.

Reference here :

Guide To Solar Battery Tax Credits, Rebates, And Other Incentives

A comprehensive guide to various tax credits, rebates, and incentives for solar batteries on the federal, state, and utility level.

www.solarreviews.com

 

[Ampster]

Residential batteries installed in 2023 can qualify for the 30% federal tax credit, even if they aren’t attached to solar panels.

Thank you for that. I thought I had read that the solar charging requirement was relaxed. I am going to also assume that my 2021 deduction for batteries may be safe even though I don't always charge them from solar anymore.
Also, thanks for updating the title.

 

[Danke]

Is there any type of proof one needs that equipment has been installed? Example of do it yourself who doesn’t need permits where they live.

 

[Ampster]

Is there any type of proof one needs that equipment has been installed?

I did not submit anything other than the form. I do have history on my Solar Assistant thatproves it was in service by the end of the year for the SolArk install I did in December 2022.

 

[DIYrich]

Is there any type of proof one needs that equipment has been installed? Example of do it yourself who doesn’t need permits where they live.

In an audit, the IRS agent could come to your house to see it working. Take some pictures and have them notarized to prove date they were working.

 

[DIYrich]

Thank you for that. I thought I had read that the solar charging requirement was relaxed. I am going to also assume that my 2021 deduction for batteries may be safe even though I don't always charge them from solar anymore.
Also, thanks for updating the title.

Nope. The rules you are under is based on the year of your tax deduction. I had the install date of my battery delayed for that reason.

The tax code was not changed retroactively. In fact, many other provisions (%) were retroactive to 2022. The battery provision was explicitly effective 1/1/2023.

In other words: you are entitled to the deduction for 2023 if... does not care about recharge source.

You are entitled to the deduction for 2021 if ... can only be charged by solar. Deduction can be audited for 3 years, or 7 years if you fraudulently made the representation. After that period, charge as you like.

Please pm me your name and address so I can send a whistle blower tip to the IRS.

 

[DIYrich]

A little background:

The old Solar Tax Credit was written for "solar". It included anything that was necessary to do (main panel upgrade, etc.). Batteries were not "necessary" for solar. The PLR asked about Batteries. Since the Tax Code did not explicitly include batteries, the IRS work around (without legislative action) was to allow batteries if they were only used for solar, and not any other purpose. The IRS could then see it fitting within the "solar" definition in the Tax Code. If the batteries were used for any other purpose (time shifting grid power), then that was not "solar". In many respects, this was the IRS being lenient given what the Congress passed.

The 2022 legislation explicitly allowed batteries because: 1) It is a normal part of a Solar package; and 2) Even if you don't have solar, the grid needs ways to store the excess solar for when it is needed (hope people sign up for virtual power plant, or other such programs). Don't know why they put a 3kWh minimum (which is what I think is reasonable). Maybe so people don't try to claim their portable rechargable batteries (tools, camping, etc.).

 

[Austin68]

Since this is a new addition to the tax code is a person able to claim just batteries if they already use the tax credit for their panels and inverter?

 

[Rocketman]

Since this is a new addition to the tax code is a person able to claim just batteries if they already use the tax credit for their panels and inverter?

If the batteries were put in service prior - nope.

It is the service date that matters.

 

[Austin68]

If the batteries were put in service prior - nope.

It is the service date that matters.

So I havnt bought batteries. I take it I would be able to still claim it?

 

[DIYrich]

So I havnt bought batteries. I take it I would be able to still claim it?

Yes, assuming you meet the other requirements.

 

[ATX]

In an audit, the IRS agent could come to your house to see it working. Take some pictures and have them notarized to prove date they were working.

A video recording of the system will go long way. Showing the components and also showing that lights are turning on/off when switch is flipped!

 

[Mithril]

Any idea on if this applies to "mobile" battery systems, such as DIY "solar generator". An example would be the "system on a handtruck" type project that Will has demonstrated before.

 

[Branch Ranch]

Any idea on if this applies to "mobile" battery systems, such as DIY "solar generator". An example would be the "system on a handtruck" type project that Will has demonstrated before.

from how I interpret it, as long as your generator is 3kwh or greater it will qualify.

 

[S Davis]

Any idea on if this applies to "mobile" battery systems, such as DIY "solar generator". An example would be the "system on a handtruck" type project that Will has demonstrated before.

It does say installed, depends on their definition of installed. Couple straps and screws might pass.