Maryland’s Battery Storage Tax Credit Explained
In 2018, Maryland became the first state in the country to offer an income tax credit for energy storage systems, putting the benefits of solar batteries in reach for many more homeowners.
The Energy Storage Income Tax Credit is offered on a first come, first served basis through 2024 and can be used in combination with a federal battery tax credit to ubstantially reduce the cost of battery storage.
In this article, we’ll explore:
- How much the Maryland battery tax credit worth
- How to claim the battery tax credit
- The benefits of home solar and battery storage
Maryland’s Energy Storage Income Tax Credit is worth 30% of the cost of a battery project or $5,000 — whichever is less.
So, if you buy 10 kWh of battery storage for $10,000, the credit would be worth $3,000. If you buy 20 kWh of battery storage for $20,000, the credit would be worth $5,000 because that’s the maximum value.
However, the Maryland battery tax credit can be combined with the federal Residential Clean Energy Credit worth 30% of the cost of battery project with no maximum. And, thanks to the Inflation Reduction Act, the federal tax credit now applies to standalone battery storage that’s not connected to a solar system.
These two tax credits can be combined to reduce the cost of battery storage by up to 60%. Here’s how it works:
|10 kWh battery system||20 kWh battery system|
|Gross project cost||$10,000||$20,000|
|Maryland battery tax credit||-$3,000||-$5,000 (max)|
|Federal battery tax credit||-$3,000||-$6,000|
It’s worth mentioning that these battery tax credits are in addition to solar panel incentives offered by Maryland and the federal government.
Maryland’s Energy Storage Tax Credit Program is available to both residential and commercial taxpayers on a first come, first served basis. There are three basic steps to claiming this tax credit:
- Install battery storage
- Apply for a tax credit certificate from the Maryland Energy Administration (MEA)
- Claim the credit on your state income tax return and attach the tax credit certificate
For homeowners, the battery must be installed at a primary residence and pass all necessary permit inspections in the same tax year that you apply for the credit in. So, if your battery system passes inspection in 2023, then you can claim the credit on your 2023 state income tax return.
To earn an energy storage tax credit certificate for tax year 2023, the homeowner or installer must submit a paper or online application by January 15, 2024. It’s best to do this as soon as possible, because there is a limited set of funds allocated for residential battery installations each year, as we’ll discuss below.
Once you have a tax credit certificate, you can claim a credit worth the lesser of 30% of the battery cost or $5,000 in Part R of form 500CR (2022 version shown below) when you file your state income tax return.
As form 500CR makes clear, you must include your tax credit certificate in order to claim the credit.
This article does not constitute tax advice. Consult a licensed tax professional for help claiming the Energy Storage Systems Tax Credit.
What if Maryland’s residential battery tax credit funds run out?
According to program administratiors, the residential section of Maryland’s Energy Storage Income Tax Credit was “fully subscriped” by early April 2023. However, it’s still worth applying if the residential allocation runs out.
That’s because once a certain allocation is oversubscribed, applications are placed on a waiting list. And on July 1, 2023, the designations for the remaining commercial and residential funds are removed, and the remaining funds are allocated in order that applications on the waitlist were received.
So, if you missed out on the funds reserved for residential projects, there is still a chance to earn a tax credit certificate from unused commercial funds made available on July 1. According to the MEA, about 94 percent of the commercial battery credit allowances was still available on March 29, 2023.
|Program section||2023 allocations||Funds remaining on March 20, 2023|
|Commercial – purchased systems||$300,000||$273,480|
|Commercial – leased systems||$150,000||$150,000|
Table updated on April 10, 2023. Figures are subject to change as tax credit allocations are reserved.
There are three main reasons to invest in battery storage in Maryland (in addition to tax credits that can reduce the cost by up to 60%).
First, between extreme weather, cyberattacks, and squirrels, power outages increased 80% from 2000 to 2021. Battery storage can power essential systems like refrigeration, hot water, and wifi during outages.
It’s worth noting that solar-only systems are typically shutoff during outages to prevent the backflow of electricity from harming utility workers repairing the grid. So, battery storage is key to backup power.
Second, many utilities have time-of-use rate plans, under which the cost of electricity varies during peak and off-peak hours. Battery storage can be used to store cheap electricity during off-peak periods to use during peak periods when it is more expensive. And with both solar and battery, homeowners can store and use their own electricity and stop worrying about electricity rates altogether.
Finally, battery storage is a means to energy independence. Electricity is an essential cost that most homeowners pay throughout lifetimes no matter what.
Purchasing electricity through a utility leaves you no control over what it costs, where it comes from, or what your monthly payments are funding. But with solar panels and battery storage, you have control where your electricity comes from and how much it costs.
The bottom line
Maryland’s battery tax credit is a very unique and lucrative incentive, and can be combined with the federal Residential Clean Energy Credit to reduce the cost of battery storage by up to 60%.
This credit is offered on a first come, first serve basis and is claimed on your state income tax return.
There are several benefits to have battery storage, chief among the is the ability to power essential electrical systems when the grid goes down.