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

How much is Maryland’s battery tax credit worth?

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:

It’s worth mentioning that these battery tax credits are in addition to solar panel incentives offered by Maryland and the federal government.

Compare multiple solar and battery storage quotes from trusted local installers.

How to claim Maryland’s battery storage tax credit

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:

1. Install battery storage
2. Apply for a tax credit certificate from the Maryland Energy Administration (MEA)
3. 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.

Table updated on April 10, 2023. Figures are subject to change as tax credit allocations are reserved.

Benefits of battery storage in Maryland

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.

Team up with an Energy Advisor to compare solar and battery quotes today.

With a healthy offering of solar incentives, Maryland is an underrated state for saving money with home solar panels.

But with a combination of tax breaks, rebates, and solar renewable energy credits (SRECs), homeowners in Maryland can substantially reduce their energy costs and protect themselves from utility rate increases by installing a home solar system.

In this article, we’ll explore each of these incentives, how they would reduce the cost of a 5 kW system with a gross price of $25,000, and how paying for solar electricity compares to paying for grid electricity.

Compare multiple solar quotes from trusted Maryland-based installers.

What solar incentives does Maryland offer?

There are a handful of solar incentives in Maryland that can reduce the cost of buying solar panels.

• Sales and property tax exemptions
• The residential clean energy grant program
• The federal solar tax credit
• Solar renewable energy certificates (SRECs)
• Net metering

Let’s see how they reduce the cost of a $25,000 solar system.

Solar sales and property tax exemptions in Maryland

The first incentive to kick in is a sales tax exemption on solar energy equipment. Given Maryland’s 6% sales tax rate, this amounts to $1,500 on a $25,000 system.

Maryland also has a property tax exemption that applies to the additional home value created by a solar system. So, you can expect your solar system to increase the resale value of your home, but you won’t have to pay state or local property tax on that value.

Maryland’s Residential Clean Energy Rebate

The second incentive to apply to a home solar system is Maryland’s Residential Clean Energy Rebate. Worth $1,000, this rebate applies to solar photovoltaic systems larger than 1 kW on primary residences not held in an irrevocable trust.

Once their solar system is installed, homeowners have 12 months to apply for the rebate. The application process includes providing photos and documentation that the system was installed correctly, paid for, and inspected.

So, for our 5 kW system with a gross price of $25,000, the Residential Clean Energy Rebate would reduce the net cost to $24,000.

It’s worth noting that there is a pair of bills in the Maryland statehouses that seek to raise the residential clean energy rebate from $1,000 to $5,000. There is still a long way to go before either bill is approved and signed into law, but increasing this solar incentive would significantly increase the savings of going solar in Maryland.

Federal solar tax credit

The largest solar incentive in Maryland – and most states – is the Residential Clean Energy Credit (aka solar tax credit) offered by the federal government.

The solar tax credit is worth 30% of the price paid for a solar and/or battery system. This credit is claimed on your federal income tax return to lower your tax liability and increase your refund. If you don’t have sufficient tax liability, it can be rolled over and applied over multiple tax years.

It’s important to note that the solar tax credit applies to the cost of the system after the state Clean Energy Rebate is applied. So, for our example, the credit would be worth 30% of $24,000, or $7,200.

Always consult a licensed tax professional with questions regarding the solar tax credit and your tax liability.

Maryland Solar Renewable Energy Certificates (SRECs)

We’ve already reduced the cost of our 5 kW system by $8,200, but we’re not done yet.

The second biggest solar incentive in Maryland is the opportunity to earn and sell solar renewable energy certificates (SRECs). Registered solar systems earn one SREC for every 1,000 kW (1 MW) of electricity they produce. These certificates are sold to utility providers through brokers like SRECTrade and Sol Systems.

Like stocks on the New York Stock Exchange, the value of SRECs fluctuates based on the market. The certificates can be held for up to three years and, once registered, solar systems are eligible to produce SRECs as long as they produce electricity. As of December 2023, SRECs were valued at $57 each.

So, if our 5 kW system produces 6,400 kWh of electricity in a year, that would translate into 6 SRECs worth a combined total of $342.

It’s impossible to say where SREC prices will go. But, for easy math, let’s say the price averages $50 over the next seven years and our 5 kWh solar system produces 42,500 kWh of electricity.

Here’s how that impacts the net cost of our 5 kW system.

Of course, the system will produce electricity and SRECs much longer than 7 years, but Maryland’s solar carve-out is currently scheduled through 2030, and it’s hard to say what will happen after that.

How to earn and sell SRECs in Maryland

1. Register your system with the Maryland Public Service Commission (PSC) to become an eligible SREC generator
2. Register your system in PJM’s Generator Attribute Tracking System (GATS) to track your generation and earn SRECs
3. Sell your SRECs on aggregators like SRECTrade and Sol Systems

Net metering in Maryland

Net metering is a billing structure that allows solar owners to earn credit for the excess electricity that they push onto the grid. This credit can be used to offset the cost of electricity they pull from the grid when their solar panels aren’t producing.

Maryland has a strong net metering policy that requires utilities to credit solar owners for the full retail rate of electricity for solar exports. In other words, the value of electricity pushed onto the grid is equal to the value of electricity pulled off the grid. This 1-to-1 net metering structure is one of Maryland’s strongest solar incentives because it allows homeowners to completely replace their electricity bills with lower payments on their solar panels.

It’s worth noting that Maryland has a 3,000 MW capacity limit for net-metered solar systems, and 932 MW of that capacity was operational by October 2021. So, net metering won’t be available forever in Maryland, and it’s worth locking in this strong policy while it’s available.

Maryland battery storage incentives

More and more homeowners are adding battery storage to their solar systems to provide backup power during outages and further distance themselves from their utility provider. In Maryland, there are two incentives that can significantly reduce the cost of battery storage.

First, there’s the Residential Clean Energy Credit through the federal government. This is the same as the solar tax credit mentioned above, and it’s worth 30% of the cost of battery storage, whether or not it’s attached to a solar system.

Then, Maryland has a state incentive called the Energy Storage Income Tax Credit. The state tax credit is worth 30% of the installed cost of the battery or $5,000, whichever is less.

The best part is that these two incentives can be combined to reduce the cost of battery storage by up to 60%.

Let’s say you wanted to add 10 kWh of battery storage at an installed cost of $10,000. Here’s how the tax credits would combine to reduce the cost.

Maryland has a limited pool of funds for the Energy Storage Income Tax Credit that are distributed on a first-come-first-serve basis and the program is currently authorized through 2024.

Consult a licensed tax professional with questions regarding tax credits.

Are solar panels worth it in Maryland?

With rebates, tax breaks, and SRECs, Maryland has more solar incentives than most states. Between these incentives and the rising cost of electricity, homeowners in the Old Line State stand to save tens of thousands of dollars by paying for solar panels instead of grid electricity.

The chart below shows the cumulative cost of paying for a 5 kW solar system versus paying a utility for the same amount of electricity it would produce.

By paying cash, a homeowner could expect to save well over $20,000. Taking out a 20-year solar loan reduces the overall savings, but can provide bill savings within the first few years.

Frequently asked questions

Does Maryland have a tax credit for solar panels?

There are two tax credits available in Maryland: A 30% federal tax credit that applies to solar panels and battery storage, and a 30% state tax credit that applies to battery storage only (up to $5,000).

These credits can be combined with other solar incentives to substantially reduce the cost of solar panels and battery storage.

Can I get free solar panels in Maryland?

No, you cannot get free solar panels in Maryland, or any other state, for that matter. Ads for “free solar panels” are usually scams that mislead homeowners into signing long-term solar leases with escalating monthly fees.

While solar panels may not be free in Maryland, the state does have a handful of incentives that can substantially reduce the cost of solar equipment and battery storage.

Does Maryland buy back solar energy?

Maryland’s clean energy goals require utilities to buy a certain amount of solar renewable energy certificates (SRECs) per year. Solar owners in Maryland can earn SRECs with their solar production and sell them back to their utility provider. In December 2023, SRECs were valued at $57 each.