Federal Solar Tax Credit Extended (USA)

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Small Cabin Forum / General Forum / Federal Solar Tax Credit Extended (USA)


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MtnDon Member	# Posted: 23 Dec 2015 16:58 Reply It is official. Congress did extend the solar tax credits. The legislation extends the 30 percent tax credit for three years, through 2019. It then will drop to 26 percent in 2020 and 22 percent in 2022. After that, the tax credit will disappear for residential installations and fall to 10 percent for commercial projects. The credit will be 10 percent in 2022 and beyond for residential systems that are owned by a third party. Interesting note: in past years the IRS has been allowing the solar tax credit for installations on RV's.

AK Seabee Member	# Posted: 23 Dec 2015 19:29 Reply Yay! I am assuming the system has to be operational or do you just have to buy the parts and pieces? I have some research to do.

darz5150 Member	# Posted: 23 Dec 2015 19:36 - Edited by: darz5150 Reply I used that credit a few years back, and it wasn't really even worth filling out the paperwork. I assumed that you would receive a discount on your taxes= to 30% of your investment. ie. invest $1000, taxes go down $300 for that year. By the time they did the math, with the multipliers and this percentage/subtract that percentage, pi times the radius squared divided by the square root of that total I ended up with: $1600 worth of receipts turned in, reduced my taxes that year by $33.15! Then the next year, taxes went up almost $50.00 because I had made improvements to the property. It is quite possible I was ripped off by the good ole tax man. But how could there be any corruption involving taxes???? Someone told me that since we don't need to buy a permit for solar around here that by me applying for the credit is the same thing as me asking for the tax appraiser to PLEASE come and visit me next year.

darz5150 Member	# Posted: 23 Dec 2015 19:42 Reply Has anyone else tried for this credit? Like I said I may have just been dooped from the local offices.

AK Seabee Member	# Posted: 23 Dec 2015 19:51 Reply Must be common core math

darz5150 Member	# Posted: 23 Dec 2015 20:00 Reply Quoting: AK Seabee Must be common core math It may be. I was always pretty good at math. It may be that I totally didn't understand it also.LOL. That's why I am curious if anyone alse has applied for this credit.

MtnDon Member	# Posted: 23 Dec 2015 21:36 Reply Quoting: AK Seabee I am assuming the system has to be operational or do you just have to buy the parts and pieces? I have some research to do. The credit applies to the tax year the system goes live. A pile of parts gets nothing.

MtnDon Member	# Posted: 23 Dec 2015 21:53 - Edited by: MtnDon Reply Quoting: darz5150 I assumed that you would receive a discount on your taxes= to 30% of your investment. ie. invest $1000, taxes go down $300 for that year. No, your taxes do not change at all. You get a TAX CREDIT to be applied to the amount of federal tax owed. Maybe that sounds the same but it is not. The energy tax credit is calculated totally independently of all the other tax calculations, deductions and exemptions. The Credit is entered on line 53 of last years 1040 form. Direct reference to form 5695 on that line. Do you recall filling out form 5695? That's the sheet where you calculate the 30%. IRS form 5695 gives you a TAX CREDIT that reduces your federal tax liability by 30% of the qualified items and qualified (hired out) labor. If your tax liability is less than the amount of the CREDIT the unused amount rolls forward 5 years (last time I looked that was the case). Quoting: darz5150 Has anyone else tried for this credit? Like I said I may have just been dooped from the local offices. Yes, I have used the federal solar tax credit. Twice, two different years, two different projects. If you did not fill out the 5695 you should see a tax expert and get it sorted out. It is real money when used to reduce your tax liability. Everything used to install from the PV panels, pole, bolts, wire along to and including the wires to connect the inverter to the standard service panel are eligible. Labor paid to someone to do any installation work counts. Your own labor does not count just like it does not count for any DIY projects related to anything to do with taxes. If you received any local rebates for components or whatever, those must be subtracted from your cost before calculating the tax credit. As for the thought that using a tax credit on your federal taxes results in an increase in your property taxes, I think you are assuming too much. I do not believe there is any exchange of information between the IRS and the local property tax guys. We installed solar and have see no increase in valuation in the years since, other than an small base increase that was a similar % to properties that received no solar system. You still reap large benefits in reduced / lower power costs.

darz5150 Member	# Posted: 23 Dec 2015 23:33 - Edited by: darz5150 Reply Mt. Don, Thanks for the reply. And the original post. I wasn't trying to put a negative spin on your post by any means. I was just stating what I received locally on property taxes. I did not pursue it federally. I do have my taxes prepared from an accountant not H&R block. After I showed him the local paperwork mess, he said my credit would be negligible. According to him with the credit, it would have reduced my taxable income responsibility from $45,000 to $44,476 dollars taxable income. Quoting: MtnDon As for the thought that using a tax credit on your federal taxes results in an increase in your property taxes, I think you are assuming too much. The person that gave me this information recently retired (2 years ago) that was one of the county appraisers at the time. I didn't mean to imply the IRS called the county. Actually I called the county. He also happens to be my neighbor. He explained that when I first built my cabin, it was taxed as a vacation home. After improvements it was zoned/taxed the same as a subdivision. So at least that much I didn't assume. After many trips to the county clerks office and many appeals, we have been reclassified back to the way it was. Back to a cabin in the woods, not a house in a subdivision with paved streets and street lites etc. Quoting: MtnDon You still reap large benefits in reduced / lower power costs. Once again you are correct. When I first started with solar it was to provide power for us during power outages. Now that I have upgraded things a little bit, it saves money every month. It costs us about a dollar a day for electric, except for the summer when running the A/C. Once again, I don't want you to think I was ripping on your post. I know you and some others here have solar systems that others would love to have. And I still have many, many questions that you will probably be able to answer. Thanks and Merry Christmas to all.

darz5150 Member	# Posted: 24 Dec 2015 00:27 - Edited by: darz5150 Reply I just had another thought. Instead of a tax credit for installing solar, wouldn't it be way more beneficial since we have the new global climate agenda going on: instead of slowly fazing out the tax credit? To; require all new residential construction, taking out a mortgage or loan be required to install enough solar panels to provide at least 1/3 of their power needs? At least in areas where it has the solar potential? That's a 5% incentive to lower the carbon footprint residentially. If you multiply that by the number of new homes built, that would possibly save a couple of coal fired power plants and maybe a steel mill or 2 from being regulated out of business. Saving several thousand jobs.

NorthRick Member	# Posted: 24 Dec 2015 13:22 Reply Quoting: MtnDon Yes, I have used the federal solar tax credit. Twice, two different years, two different projects. I didn't realize you could do that. I thought it was a 1 time thing. Does that mean I could install solar on our house in town, take the credit, then do it again on our cabin?

NorthRick Member	# Posted: 24 Dec 2015 13:30 Reply Quoting: darz5150 According to him with the credit, it would have reduced my taxable income responsibility from $45,000 to $44,476 dollars taxable income. Either you misunderstood him or you should find a new accountant. If you had $45K taxable income, federal income tax you owe is around $7,100 (if single). If you spent $10K on a solar system, you can apply a $3,000 credit to your tax bill, meaning you now only have to pay the tax man $4,100. That means your $10K system only cost you $7K in the end.

MtnDon Member	# Posted: 24 Dec 2015 13:50 Reply The rules can change whenever congress does something or does not do other things. So always check. But here is what I have seen listed for many years now, and is still on the gov website... "Solar-electric property There is no maximum credit for systems placed in service after 2008. Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016. The home served by the system does not have to be the taxpayer's principal residence." So by the last statement you can add solar-electric to any number of properties you own and use from time to time. That has also been accepted in practice by the IRS to include Recreational vehicles. I know people who have claimed their RV solar electric and received credits. There is also a provision someplace that prohibits tax credits for installations on rental property. But then there is also a commercial program. Note that solar water heating and other energy conservation programs have differences in the rules. Solar-electric has no cost ceiling but other programs do, for example. And this is USA; have no idea what Canada may offer.

MtnDon Member	# Posted: 24 Dec 2015 13:53 Reply Quoting: NorthRick Quoting: darz5150 According to him with the credit, it would have reduced my taxable income responsibility from $45,000 to $44,476 dollars taxable income. Either you misunderstood him or you should find a new accountant. If you had $45K taxable income, federal income tax you owe is around $7,100 (if single). If you spent $10K on a solar system, you can apply a $3,000 credit to your tax bill, meaning you now only have to pay the tax man $4,100. That means your $10K system only cost you $7K in the end. Agreed.

MtnDon Member	# Posted: 24 Dec 2015 13:55 Reply State by state listing of all energy policies and incentives.

AK Seabee Member	# Posted: 24 Dec 2015 20:22 Reply MtnDon, You are a wealth of knowledge. Thank you for sharing!

MtnDon Member	# Posted: 24 Dec 2015 21:24 - Edited by: MtnDon Reply I just used Google and read the government documents. That led me to also find that in my state I could buy anything I was using to install the solar without paying the NM states gross receipts tax (our sales tax). So all the wood, screws, nails, wire connectors, heat shrink tubing, etc. etc. for the battery, CC and inverter enclosures and everything to do with the solar-electric system were state sales tax free as well as counting towards the federal credit. It can pay to spend time on research.

Drennos Member	# Posted: 13 Jan 2021 08:17 Reply Quoting: darz5150 I used that credit a few years back, and it wasn't really even worth filling out the paperwork. I assumed that you would receive a discount on your taxes= to 30% of your investment. ie. invest $1000, taxes go down $300 for that year. By the time they did the math, with the multipliers and this percentage/subtract that percentage, pi times the radius squared divided by the square root of that total I ended up with: $1600 worth of receipts turned in, reduced my taxes that year by $33.15! Then the next year, taxes went up almost $50.00 because I had made improvements to the property. It is quite possible I was ripped off by the good ole tax man. But how could there be any corruption involving taxes???? Someone told me that since we don't need to buy a permit for solar around here that by me applying for the credit is the same thing as me asking for the tax appraiser to PLEASE come and visit me next year. what about taxes now?

Nobadays Member	# Posted: 13 Jan 2021 08:45 Reply Quoting: Drennos what about taxes now? For Residential: A solar PV system must be installed before December 31, 2019, to claim a 30% credit. It will decrease to 26% for systems installed in 2020 and to 22% for systems installed in 2021. And the tax credit expires starting in 2022 unless Congress renews it. There is no maximum amount that can be claimed.

scott100 Member	# Posted: 13 Jan 2021 13:06 Reply Interesting the comments here that it no longer has to be your principal residence. That used to be the case. I've used this credit previously. Thanks for the update. I'll check into it this year as I installed a new system at our cabin. There also may be state incentives. In NYS, there were some, but at the time I couldn't use them as they required you to use an installer that was on their list. My system was a solar thermal system that I installed myself. At the time we also had some legislation that said your property assessment could not be raised solely based on the installation of a solar system. So all the solar that was installed in NYS did not cause increases in property taxes. They get you in the end, anyway, but you couldn't blame the solar

scott100 Member	# Posted: 13 Jan 2021 13:52 Reply Also (no tax expert here) but it looks like you can also include the battery bank in the cost of the solar system for the credit so long as it it solely charged by the solar system (ie, not grid connected to also charge off the grid).

darz5150 Member	# Posted: 13 Jan 2021 17:54 Reply Quoting: Drennos what about taxes now? I found out I had an accountant that knew nothing about the credit, as well as the county people. My bad for not doing my homework also. Got a different accountant. I had a few meatings with the county people. And found out I was being overcharged for years. Got a new appraisal. Reclassified the land as non tillable farmland. And also found out they had my cabin listed as a 1 1/2 story with a Concrete foundation..which it is not. End result.....46% reduced taxes. But no refund for all the years of overcharge. Go figure. But if they would have undercharged me. I would have to pay for their mistake.

Peewee86 Member	# Posted: 14 Jan 2021 06:21 Reply Last month Congress did extend the solar investment tax credit for 2 more years. The Consolidated Appropriations Act 2021 was passed by Congress on December 22nd. Many websites have not yet updated the new dates. With the new extension projects that begin construction after 2019 but before 2023 and are placed in service before 2026, a 26% ITC will apply. Projects that begin construction in 2023 and are placed in service before 2026, a 22% ITC will apply; and projects that begin construction after 2023 or that are placed in service in 2026 or later, a 10% ITC will apply.

Nobadays Member	# Posted: 14 Jan 2021 08:39 Reply Peewee.... does this apply to residential or just commercial enterprise? My understanding is this is only for commercial, would love it if it is also residential! HERE on the IRS website I see this: Updated October 2020 Q. Are there incentives for making your home energy efficient by installing alternative energy equipment? A. Yes, the residential energy efficient property credit allows for a credit equal to the applicable percent of the cost of qualified property. Qualifying properties are solar electric property, solar water heaters, geothermal heat pumps, small wind turbines and fuel cell property. Only fuel cell property is subject to a limitation, which is $500 with respect to each half kilowatt of capacity of the qualified fuel cell property. Generally, this credit for alternative energy equipment terminates for property placed in service after December 31, 2021. The applicable percentages are: In the case of property placed in service after December 31, 2016, and before January 1, 2020, 30 percent. In the case of property placed in service after December 31, 2019, and before January 1, 2021, 26 percent. In the case of property placed in service after December 31, 2020, and before January 1, 2022, 22 percent. Please point me in the right direction...

Peewee86 Member	# Posted: 14 Jan 2021 09:40 Reply Nobadays- As you noted the IRS website has not been updated for several months. The new bill was signed into law less than three weeks ago. Here are a couple of links to summaries that would indicate my information is correct. https://unboundsolar.com/blog/federal-solar-tax-credit-guide https://www.journalofaccountancy.com/news/2020/dec/tax-provisions-in-covid-19-relief- bill-ppp-and-business-meal-deductibility.html Or google search Consolidated appropriations act 2020. -PeeWee

Peewee86 Member	# Posted: 14 Jan 2021 10:15 Reply In the second link that I posted itâ€™s hard to find the verbiage related to the solar tax credit. Scroll down the page under â€œTwo year extensionsâ€ it says â€œSec. 48 energy investment tax credit for solar and residential energy-efficient property.â€

Nobadays Member	# Posted: 14 Jan 2021 16:18 Reply PeeWee... Thank you! Sweet! This should help others on here out as well... maybe get some of my neighbors off the fence. We installed our primary cabin system in 2019 so got the 30% tax credit. Makes the investment a bit easier to swallow when you know - this year you get a quarter of the money you spend back. My wife was.... retired now, a certified tax consultant she really poured over the tax code last year when we filed. Our lithium modules were used, Chevy volt modules and we were told by the seller they wouldn't count toward the credit because they weren't new.... my wife did the due diligence and found nothing that said used solar equipment was exempt. Thanks again!

Peewee86 Member	# Posted: 14 Jan 2021 17:10 Reply No problem. In the next couple years Iâ€™m planning on going all in on solar. I currently have 350W learning curve system at the cabin. In two years I hope to have 10 times that amount at the cabin and another 5.7 KW on my primary residence. I already have the panel mounts installed on the roof at my home. That wouldâ€™ve locked me into last yearâ€™s rate had the tax credits not been extended. Iâ€™d love to hear feedback on your Chevy Volt batteries. Have you discussed it elsewhere on this forum? I donâ€™t want to get too far off topic here.

Nobadays Member	# Posted: 14 Jan 2021 21:14 Reply PeeWee... haven't discussed my system on this forum to any extent. Here is a LINK to the DIYSolar forum with information about the system. I have added another 750 watts of solar and 2 more, 2kw Volt modules. We are pretty happy with these modules. That said if I were to do it again I would probably go with Lifepo4, either building my own modules or pre built units. We have roughly 3,000 in our storage and don't have low temp cut-off which would be hard to add to our system.... readily available in Lifepo4 BMSs and some of the pre built modules. A cheaper well thought of pre built is the SOK 12v units. In THIS thread Steve_s gives some great information on building your own Lifepo4 modules.... and I think he has more info in another post that I can't find.

Atlincabin Member	# Posted: 15 Jan 2021 09:40 Reply A couple comments: My understanding of the tax code is that ANYTHING that is part of the solar system adds to the overall cost and is therefore eligible for the 30% (or whatever it ends up being) credit. That would include everything from wire to conduit to a backup battery or generator. Your interpretation may vary.... With regard to the Chevy Volt modules, I put a small solar system on my hangar that included 3 of the 24-volt Chevy modules (used, from ebay). Enclosed in an insulated box that has a thermostatically-controlled heater (run by the batteries, of course). Has worked flawlessly for 3 years. Unfortunately, from what I see, the Chevy Volt batteries have gotten popular enough that the prices are quite high now compared to a few years ago. I also built a small Li battery for my camper from cells that I bought from AliExpress (recommended by Will Prowse, online solar guy, look up his videos). They were as cheap or cheaper than the Chevy batteries and have worked well. You would need to buy and install a BMS (battery management system) in both cases, but these are readily available online.