This is not tax advice, please review your details with your tax advisor/preparer.
What are we covering in the blog post today? The Federal Tax Credit for Solar and Batteries powered by Solar and how the administration of a project may push you into another year. The best information is from the Federal Site- linked here, but let’s go over the basics as well. What is the Solar FTC? It is a tax credit, for purchasing, installing, and interconnecting, a photovoltaic system on a property that you own. The Solar FTC also has different specifications for residential and commercial buildings. For projects that are being installed for the years 2021-2022 the credit amounts to 26% of the purchase price with the credit amount failing to 23% for installations in 2023, and there is no maximum amount that can be claimed. The most succinct PDF that I have found for residential projects is this one linked here, from the Department of Energy for residential projects. As stated in the pamphlet batteries that are powered by solar or renewables are eligible for the tax credit, but the batteries will get the rate for the year that they are installed. Also, interestingly, the pamphlet mentions that your PV system at your residence (does not need to be primary) does not need to be interconnected to the grid, but the system must produce energy for the home. I think this will allow for products like the newly released Enphase IQ8 micro-inverters to be able to be used in more locations that do not have access to grid lines. The Enphase IQ8 micro-inverters are revolutionary because they can create micro-grids on their own and do not need to be grid to “turn-on” as per Enphase.
Back to the FTC, for commercial buildings the project lengths can be significantly longer than for residential projects just due to review times from jurisdictions and utilities. For projects that cross a certain threshold in size, additional reviews are mandated, and those reviews can push a project’s completion or installation date into another year. In general, for the State of California projects that are over 10kWh in production in size go through a more in-depth review of design and then projects over 20kWh go into an even more in-depth review of how that system would be installed. All these review times increases the timeline for completion and installation of your project, so it is best to be aware of the potential length of a project to better predict what Federal Tax Credit may apply to you. Just to reminder again, this is not tax advice, and please review your specific situation with your tax preparer. The best site that covers all commercial projects is again the Federal website Solar Summer linked here. If you are considering Solar for your commercial property than I would recommend reading the section for commercial properties and my resource section because both have a lot of collected information.
As always please let me know if you have any questions and have a great one!
Best,
Piotr
Peroon Energy Consulting Sources: https://www.energy.gov/eere/solar/articles/residential-and-commercial-itc-factsheets