Most homeowners who have solar power systems to provide their residential electricity fall short of obtaining the full potential benefit of their respective systems. Without a way to store excess energy, they do not have any reserve power when the proverbial rainy day becomes a reality and the sun stays hidden for potentially days at a time. Fortunately, it is possible to add a battery storage system to an existing residential solar power system to store excess energy and use it when the sun is not available to produce power.

The combination of solar panels and a battery system officially is called a solar + storage system. Such systems typically use a lithium-ion battery to store excess electricity that is generated on sunny days and make it useable at other times. Power + storage enables you to rely on the stored energy to power your home during power outages, brownouts, and blackouts for as long as the battery still contains power. It also helps when the sun is not out and the solar panels cannot generate solar power.

Federal Tax Incentive for Solar + Storage

Installing a solar + storage system carries significant costs. You need to buy solar panels to produce power, a lithium-ion battery to store excess power, and an inverter to connect them. You also need to pay for installation. Even if you already have solar panels in place and working, you still need to pay between $20,000 and $30,000 to install the lithium-ion power cells to store excess energy produced by your solar panels.

The best solar companies in Phoenix are fully capable of installing solar panels, lithium-ion power cells, and inverters to create a fully functioning solar + storage system. Doing so will cost tens of thousands of dollars, but tax incentives help to offset those costs in addition to any energy savings that you might obtain. The federal government has a significant credit that greatly reduces the price of buying and installing storage systems for residential solar power.

After you pay up to $30,000 to install a storage element to create a full solar + storage system, you qualify for a federal tax credit on your annual income tax return. The federal solar tax credit will reimburse up to 30 percent of the cost to add storage to an existing residential solar power system. If you pay $30,000 for a lithium-ion battery storage system, you could qualify for a $9,000 income tax credit. That is not a deduction that lowers your taxable income. It is a credit that pays you in full – even when the amount of the credit exceeds the income tax liability.

Additional Tax Incentive for Arizona Homeowners

When Arizona homeowners install solar equipment to produce energy, they could qualify for an up-to $1,000 income tax credit. The state will provide a credit that is equal to 25 percent of the cost with a maximum credit of $1,000. If you spend $4,000 to install solar equipment, you would qualify for the maximum credit.

Those who do not obtain the maximum benefit initially could obtain the rest with subsequent solar upgrades. A homeowner who spent $2,000 to install solar panels would qualify for a $500 credit. If that homeowner installs more solar equipment, like a storage battery that costs at least $2,000, that person could obtain the remaining $500 income tax credit. The state and federal tax incentives could greatly offset the initial investment in a solar + storage system and greatly improve your return on investment.