PV System design and installation costs

kansas · February 2015

I'm about to file my taxes, taking advantage of the federal renewable energy tax credit. I designed and installed (and endlessly tinker with) the system myself. I did quite a bit of research before I bought anything and have added a few things as a result of good advice from this forum. I have two questions: 1) how do I value the cost of designing the system, and 2) what is a fair basis for calculating the installation costs?

I've kept records of the hours spent installing the pole mount, drilling two 1.25 holes through my 8" cabin foundation, designing and building a battery box, wiring the system, etc. What is a fair $$/hour for that type labor. I'm in Kansas.

I didn't keep records for the time I spent reading about photovoltaics, researching products, determining my electrical needs, selecting components, etc. because I'm pretty obsessive about that type thing, and enjoy it, so $10/hr would produce a design cost that well in excess of the cost of the system components. Can anyone give me an idea of how much it would cost to hire someone to design a small off grid system like the one reflected in my signature? I just need someplace to start.

Any help will be appreciated. Bill

Vic · February 2015

Kansas,

To the best of my knowledge, the IRS credits are based ONLY on invoices. Believe that the IRS values the time/labor of the filer at $000.00 per hour, just to keep things simple. This is the way I have handled my systems.

But best consult your Tax Advisor. FWIW, Vic

Mountain Don · February 2015

For tax credit purposes all the time spent researching and designing and assembling count for nothing. No invoice, no tax credit. It's pretty simple. If you paid someone else to do design work you can count that. Of course they have to declare that as income and pay tax on it. Time spent drilling holes in concrete does not count, but you may be able to count the tool cost... better check on that with a tax expert. I rented a trencher and that was an acceptable expense. The materials for the battery box would count. But not your time.

kansas · February 2015

Thanks, Vic. You're probably correct, particularly since the Act refers to "expenditures" for labor and installation costs, and makes no mention of design costs one way or the other. I'm my own tax adviser, however, and would still be interested in any information on what it would cost to have someone else do the design and installation.

kansas · February 2015

Yes - just wishful thinking on my part. Thanks all.

jcheil · February 2015

I read the law many times and agree, any of YOUR labor is not allowed. And research would never be allowed. Only the government is allowed to waste billions of our tax dollars to "research" stuff

And like someone said, if you paid someone, they would have to claim the income on their taxes. However, you only have to claim income $600 and over. So if you, for example, had 5 or 6 of your friends, that "helped" you do the installation labor and you paid each of them $550, and had made an invoice for that labor, then I don't see any reason why you could not include that nor would they have to claim it.

sub3marathonman · February 2015

jcheil wrote: »

And like someone said, if you paid someone, they would have to claim the income on their taxes. However, you only have to claim income $600 and over. So if you, for example, had 5 or 6 of your friends, that "helped" you do the installation labor and you paid each of them $550, and had made an invoice for that labor, then I don't see any reason why you could not include that nor would they have to claim it.

Ummmm, that might not be the best idea, unless you want to make some new "friends".

From the IRS website http://www.irs.gov/uac/Reporting-Miscellaneous-Income :

Self-Employment Income
It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income.
...
Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer.

Now, I am definitely NOT a tax advisor, and you cannot rely on what I say, you'll have to consult your own tax advisor.

As a tangential note, the IRS even requires people with battery based PV systems to charge them with solar in order to get the full tax credit for the PV installation. Of course, those off-grid don't have to worry about that technicality.

stmar · February 2015

Would replacing batteries be eligible for the credit?

BB. · February 2015

I have not seen servicing and repairs of solar power systems included... But it would be difficult to police Adding panel or battery capacity vs just replacing broken panels/batteries.

http://www.irs.gov/instructions/i5695/index.html

If the hardware is new, and improves the efficiency of the home and otherwise falls under the existing "new components" requirements--I cannot see where replacement items (furnace, panels, charge controllers, batteries, etc.) would not be deductible.

They seem to go to great lengths to avoid discussing repairs vs installing equipment that meets the energy efficiency requirements (i.e., if I had an energy efficient furnace that broke, and replaced with a new energy efficient furnace--That seems to be within the scope of the requirements).

For example, Arizona has specific statement:

http://www.azdor.gov/portals/0/brochure/543.pdf

Q. Do repairs of existing solar energy systems qualify for the credit?
A. No. The credit is allowed for the installation of a qualifying solar energy device.

The addition of a new component part or ancillary equipment to an existing system would not qualify.

But even that seems to be a bit of a strech to define the difference between existing and new (new GT Inverter is new--Was not a repair of an existing unit--And in any case, a broken unit is not "energy efficient").

-Bill ???? B.

jcheil · February 2015

sub3marathonman wrote: »

Ummmm, that might not be the best idea, unless you want to make some new "friends".

From the IRS website http://www.irs.gov/uac/Reporting-Miscellaneous-Income :

Self-Employment Income
It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income.
...
Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer.

Now, I am definitely NOT a tax advisor, and you cannot rely on what I say, you'll have to consult your own tax advisor.

As a tangential note, the IRS even requires people with battery based PV systems to charge them with solar in order to get the full tax credit for the PV installation. Of course, those off-grid don't have to worry about that technicality.

Yes, I agree, if you want to be picky and read into "the letter of the law", then make sure your kid claims that $10 he gets for mowing your neighbor's lawn

And all those things you sell on ebay or at your yard sale. And after those yard sales don't forget to go to the state tax office and pay them the sales tax you collected at your yard sale.

But, in my hypothetical scenerio above, since the person PAYING the "wages" was NOT going to file a 1099 with the IRS, then the recipient of the wages would have nothing to worry about.
I'm not a tax advisor either.

PV System design and installation costs

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