tax incentives attached to bailout

jtdiesel65

If I'm reading this right in September, the senate passed a modified version of H.R.6049 which extends residential credits and allows for 30% or $4000 for solar electric (pv). However, in the version that was just passed yesterday as part of the bailout, it looks like the senate removed the caps on PV. If I read this correctly, that's 100% of cost as a credit.

They also changed wind, but its complicated. It looks like 30%, but then it also says something about $500 per 0.5KW with a $4000 cap. I think it depends on how one uses or classifies the generation.

I'm not sure what will happen in the end, but this is something to watch.

jtdiesel65

Re: tax incentives attached to bailout

Here's the previous language in HR6049 :

(b) Maximum Credit for Solar Electric Property-

(1) IN GENERAL- Section 25D(b)(1)(A) is amended by striking `$2,000' and inserting `$4,000'.

(2) CONFORMING AMENDMENT- Section 25D(e)(4)(A)(i) is amended by striking `$6,667' and inserting `$13,333'.

===============
Here's language in bailout bill so far:

(b) REMOVAL OF LIMITATION FOR SOLAR ELECTRIC
PROPERTY.—
(1) IN GENERAL.—Section 25D(b)(1), as
amended by subsections (c) and (d), is amended—
(A) by striking subparagraph (A), and
(B) by redesignating subparagraphs (B)
through (E) as subparagraphs (A) through and
(D), respectively.
(2) CONFORMING AMENDMENT.—Section
25D(e)(4)(A), as amended by subsections (c) and
(d), is amended—
(A) by striking clause (i), and
(B) by redesignating clauses (ii) through
(v) as clauses (i) and (iv), respectively.

System2

Re: tax incentives attached to bailout

jtdiesel65 wrote: »

Here's the previous language in HR6049 :

(b) Maximum Credit for Solar Electric Property-

(1) IN GENERAL- Section 25D(b)(1)(A) is amended by striking `$2,000' and inserting `$4,000'.

(2) CONFORMING AMENDMENT- Section 25D(e)(4)(A)(i) is amended by striking `$6,667' and inserting `$13,333'.

.

I guess the $4000 is the upper limit for the 30%.

What is the $13.333?

solarhills

Re: tax incentives attached to bailout

Does the bailout bill as passed mean that any PV product purchased in 2008 is now subject to the credit?

n3qik

Re: tax incentives attached to bailout

In 2007 it was any roof mount system that was placed into service. Parts could have been purchased in 2006, but the switch had to be turned on in 2007. I will be taking the credit this year, so looks like I will be getting an extra $1000.:D:D

System2

Re: tax incentives attached to bailout

n3qik wrote: »

In 2007 it was any roof mount system that was placed into service. Parts could have been purchased in 2006, but the switch had to be turned on in 2007. I will be taking the credit this year, so looks like I will be getting an extra $1000.:D:D

When I file taxes each year I get a refund. Does that mean I will not get any "credit" for PV or does it mean I get an even bigger check back?

n3qik

Re: tax incentives attached to bailout

If you get a refund, the check will be bigger.

System2

Re: tax incentives attached to bailout

Thanks n3qik 1

jtdiesel65 wrote: »

(2) CONFORMING AMENDMENT- Section 25D(e)(4)(A)(i) is amended by striking `$6,667' and inserting `$13,333'.

Anyone know what this number in reference to?

jtdiesel65

Re: tax incentives attached to bailout

rschepis wrote: »

Anyone know what this number in reference to?

It's the upper limit. You can take 30% o 13333.

6667*0.3= $2000
13333*0.3= $4000

but it doesn't really matter because that is not what passed. Section 25D(e)(4)(A)(i) was removed. I'm assuming that because the bill didn't bounce back to the senate that the house passed the senate bill verbatim. That would mean that the upper cap was removed and those numbers mean nothing anymore.

"If you get a refund, the check will be bigger."

It's a bigger check up to a point. You can't get money back that you haven't paid. It's a credit. That is tax money you paid that gets refunded to you. You don't get a credit, if you don't pay taxes. For example if you only paid $1000 in taxes, but can claim a $2000 credit, you will only get $1000 refunded. I think you can probably get around that by claiming a $1000 credit this year and then another $1000 next year.

I don't think the credit was limited to roof mount. As I recall, racking, wire, charge controller, etc can be claimed and there was no constraints on type.

newenergy

Re: tax incentives attached to bailout

jtdiesel65 wrote: »

It's the upper limit. You can take 30% o 13333.

6667*0.3= $2000
13333*0.3= $4000

but it doesn't really matter because that is not what passed. Section 25D(e)(4)(A)(i) was removed. I'm assuming that because the bill didn't bounce back to the senate that the house passed the senate bill verbatim. That would mean that the upper cap was removed and those numbers mean nothing anymore.

"If you get a refund, the check will be bigger."

It's a bigger check up to a point. You can't get money back that you haven't paid. It's a credit. That is tax money you paid that gets refunded to you. You don't get a credit, if you don't pay taxes. For example if you only paid $1000 in taxes, but can claim a $2000 credit, you will only get $1000 refunded. I think you can probably get around that by claiming a $1000 credit this year and then another $1000 next year.

I don't think the credit was limited to roof mount. As I recall, racking, wire, charge controller, etc can be claimed and there was no constraints on type.

I think this is all correct and there is something specific in there about claiming it for more than one year when you can't use it all in one year, BUT there is something in there that says specifically that it applies for Solar Electric systems AFTER Jan. 2009.

My reading is that you can't claim the uncapped amount for systems installed this year.

It's a great change for me as an installer, but I don't see how I can sell a residential system to be installed in the next 3 months.

niel

Re: tax incentives attached to bailout

jtdiesel65 wrote: »

It's the upper limit. You can take 30% o 13333.

6667*0.3= $2000
13333*0.3= $4000

but it doesn't really matter because that is not what passed. Section 25D(e)(4)(A)(i) was removed. I'm assuming that because the bill didn't bounce back to the senate that the house passed the senate bill verbatim. That would mean that the upper cap was removed and those numbers mean nothing anymore.

"If you get a refund, the check will be bigger."

It's a bigger check up to a point. You can't get money back that you haven't paid. It's a credit. That is tax money you paid that gets refunded to you. You don't get a credit, if you don't pay taxes. For example if you only paid $1000 in taxes, but can claim a $2000 credit, you will only get $1000 refunded. I think you can probably get around that by claiming a $1000 credit this year and then another $1000 next year.

I don't think the credit was limited to roof mount. As I recall, racking, wire, charge controller, etc can be claimed and there was no constraints on type.

so from what i gather in what you are saying here is that if you don't owe the irs at the end of the year, you get ziltch, and if you owe them you can get back what you owe them if you spent that much on solar? x30%?

jtdiesel65

Re: tax incentives attached to bailout

niel wrote: »

so from what i gather in what you are saying here is that if you don't owe the irs at the end of the year, you get ziltch, and if you owe them you can get back what you owe them if you spent that much on solar? x30%?

It's complicated because typical tax payers pay throughout the year via deductions from paychecks.. So when you get to year end, its possible that you owe money even though you have already payed some money. It's also possible that you don't owe the IRS at the end of the year because you payed throughout the year.

When you file there will be two lines: 1) the total that you owe and 2) what you've already payed. If #1 is greater than #2, you send in a check. If #1 is less than #2, you get a check. A credit due to an installation is subtracted from # (the total that you owe) and the total that you owe can not be below zero.

So basically, if deductions (mortgage interest, etc) reduce #1 to a point where it's zero, you cannot use the credit. For large installations or for people with a small tax bill (#1), there is a very real chance they will not be able to take a credit for the entire amount because the tax that they owe will be less than the cost of the system.

niel

Re: tax incentives attached to bailout

ok gotcha. that's kind of what i thought you meant and i think they can do better than to treat it like most other deductions that, believe it or not, most people can't take anyway or it may only just serve to lower what you do owe. even when my medical bills came from out of pocket, i didn't qualify for anything because it had to be so huge compared to what i earned.

maybe i'm looking a gift horse in the mouth, but it's such a small gift and i think a gift from them is the wrong word to describe my money that was taken from me. anyhow, i'm not looking to argue over this or cause a big dispute on taxes as that's going too far i think, but i do think they can do better for the people if they really want to give incentives.

xiphias

Re: tax incentives attached to bailout

But you can carry the credit forward for three years, so have time to adjust withholdings to achieve the benefits of the credit. (Unless I'm confusing my state's credit plan with the federal, but I think they both work the same way.)

newenergy

Re: tax incentives attached to bailout

I'm not tax expert, but it's a credit, not a deduction.

Your tax liability depends on a lot of things and the credit will be taken right off your liability. A deduction is taken off of income, which then results in a lower liability (lowered by an amount less than the depreciation).

Whether or not you owe at the end of the year is simply a matter of whether you have paid more or less than your total liability over the course of the year. Most people are paying something out of every paycheck.

Your refund or how much you owe is simply how much you have paid minus your liability for the period.

I don't see how whether you owe or not has anything to do with whether you can use the whole credit during a year.

If your entire tax liability is less than the credit, then you can't use it all in one year.

again, that's just my read - I'm no expert.

niel

Re: tax incentives attached to bailout

you guys know more in that area than i do. i suppose i may not be alone in not being a tax wiz and i stayed with the simple forms. keep the info coming though as tax dummies like me could use the help.;)

xiphias

Re: tax incentives attached to bailout

newenergy wrote: »

Your refund or how much you owe is simply how much you have paid minus your liability for the period.

I don't see how whether you owe or not has anything to do with whether you can use the whole credit during a year.

If your entire tax liability is less than the credit, then you can't use it all in one year.

That sounds right.

Lemme try to restate what newenergy said.

You sit down to do your taxes and figure out that you owe $2500 this year. If you take the full $2000 credit, then you only owe $500.

But if the liability is less than the credit, it is possible to carry the credit forward for up to three years. For example: say you owe $1000 this year. You can't take the full $2000. Only $1000. But you can carry the remaining $1000 into the next tax year and take it then.

As newenergy points out, if you have withholdings taken out of each paycheck, and the withholdings are greater than the amount you owe at the end of the year, then you get a refund. You may get a bigger check back because of the credit. For example,

Say you owe $2500. During the year, you had withholdings from each paycheck that totaled $3500. Your refund would be $1000, the amount you overpaid. Now you also take the $2000 credit. This reduces the amount you owe to $500. Because you have now effectively overpaid by $3000, your refund check will be $3000 instead of just $1000.

jtdiesel65

Re: tax incentives attached to bailout

newenergy wrote: »

I'm not tax expert, but it's a credit, not a deduction.

Your tax liability depends on a lot of things and the credit will be taken right off your liability. A deduction is taken off of income, which then results in a lower liability (lowered by an amount less than the depreciation).

Whether or not you owe at the end of the year is simply a matter of whether you have paid more or less than your total liability over the course of the year. Most people are paying something out of every paycheck.

Your refund or how much you owe is simply how much you have paid minus your liability for the period.

I don't see how whether you owe or not has anything to do with whether you can use the whole credit during a year.

If your entire tax liability is less than the credit, then you can't use it all in one year.

again, that's just my read - I'm no expert.

Yes it is a credit. I mentioned deductions because they are handled prior to credits. Tax liability is established based upon income minus deductions to get taxable income. Taxable income is then used as the basis for total tax owed. Credits are subtracted from total tax owed. So if your income and deductions make it so you have no taxes owed (total tax liability for the year), then you will not be able to take the credit.

The confusing part is "what you owe". There is the "what you owe" in terms of total tax liability for the year. This is the amount of tax you pay based upon your yearly income. You either look this up in a table or calculate it in a small worksheet in the tax booklet.

And then there is the "what you owe" that represents the amount of money you send to the feds on April 15th when you file.

In terms of being able to use the credit, the "what you owe" that represents your total tax liability for the year is the only number that comes into play. If this is zero, you can't use the credit. If this is smaller than the credit, you can't take the whole credit. In this case, you would have to see if you can claim the unused portion in future years.

I think we agree, but it just hard to describe because of how it's filed at year end.

System2

Re: tax incentives attached to bailout

Hi

From my understanding these new enhancements to the solar tax credit incentives are only good for systems installed in 2009. Doesnt seem fair that those of us that installed in 2008 and havent even claimed the "old" credit cant be included. I have called & written my congressman and senators to complain but as to be expected I have not gotten a response.

Kevin

jtdiesel65

Re: tax incentives attached to bailout

What if you just claim it was placed into service in Jan 2009?

newenergy

Re: tax incentives attached to bailout

I talked to some other people in the business yesterday about this and they said they are doing installs for the rest of the year but holding off on the interconnection agreement with the utility until Jan 1st. The system can not be operated except as a test until that agreement is executed.

solarix

Re: tax incentives attached to bailout

Here is a good explaination of the new solar ITC:

1. The new expanded residential ITC doesn’t take effect until 2009, so you may want to make sure your residential projects aren’t “placed in service” until 2009 to ensure they get the uncapped credit (this may apply to projects currently under way, but not yet “placed in service”). The “SEIA Guide to Federal Tax Incentives for Solar Energy” defines “placed in service” as:

* The equipment must have been delivered and physical construction or installation on site must have been completed, although contractor personnel can still be at the site in support of startup and maintenance and completion of minor tasks like painting and attending to punchlist items.
* The taxpayer must have taken legal title and control of the equipment.
* The taxpayer must have the licenses and permits needed to operate it.
* Pre-operational tests must have demonstrated that the equipment can serve its intended function. (Other testing to determine whether the equipment can operate at the design capacity and to identify and eliminate defects can occur after the equipment is in service.)

2. The tax credit can be on the full project amount only if your customer pays tax on any rebate received. Otherwise, the tax credit is on the “after-rebate” amount. If it’s a residential project, and the customer’s tax bracket is under 30%, they would probably prefer to pay tax on the rebate and enjoy a larger tax credit. This is generally even more important for commercial projects because the larger tax credit ‘basis’ also yields more net depreciation benefit.
3. The 50% ‘Bonus Depreciation’ enacted in the 2008 Economic Stimulus package appears not to have been extended, so your customer will likely want you to complete their commercial projects before the end of 2008 if possible.

Geek

Re: tax incentives attached to bailout

solarix wrote: »

2. The tax credit can be on the full project amount only if your customer pays tax on any rebate received. Otherwise, the tax credit is on the “after-rebate” amount. If it’s a residential project, and the customer’s tax bracket is under 30%, they would probably prefer to pay tax on the rebate and enjoy a larger tax credit. This is generally even more important for commercial projects because the larger tax credit ‘basis’ also yields more net depreciation benefit.

I'm actually getting my system installed in my house in a couple weeks but was told they can interconnect in Jan.09 so I take advantage of this, so I'm really interested in hearing feedback on this.

Your quote indicates "only if your customer pays tax on any rebate received"; but I don't think taxes are ever paid on this type of rebate, right?

I live in CT.

solarix

Re: tax incentives attached to bailout

I'll try to explain.
You are technicaly receiving income as a result of your utility rebate incentive.
If you claim this as income than you can also claim the tax credit on this income.
If you don't claim the rebate as income, then you can't take a tax credit against it.
So, if you are in a tax bracket less than 30%, then it should make sense to claim the added income as additional tax will be less than the additional tax credit. People really need to consult with a tax professional to be sure though.

The bottom line is this will muddy the water on promoting solar as the customer's tax situation will be significant in determining what their savings will be. That being said, this will reduce the payback time for my customers from about 11 years down to more like 8.

Geek

Re: tax incentives attached to bailout

is the 30% off the total cost of the system or JUST my out of pocket cost?

I am hearing different opinions on this, my sales guy told me it is deducted from my out of packet cost....

could someone confirm?

Windsun

Re: tax incentives attached to bailout

Basically out of pocket costs.

If you get a 20% rebate from local utility or whatever, your tax credit is based on the cost minus the 20%.