New federal tax incentives (30%), can it be applied now?

Re: New federal tax incentives (30%), can it be applied now?

OK, I'm not a tax attorney, and will post the required "consult with your tax advisor."

However, from my understanding, here is how it works. No matter when you purchased your components, even if it was 10 years ago, what is important is the date you put the system into use. The IRS treats the components as being purchased on that date.

Now, for the rebate, the 30% applies to whatever amount is outstanding after all state and any other rebates (if applicable) are applied. So for example, if your $40K system had a state rebate of $16K, you would figure the 30% on the remaining $24K.

Now, unless you're doing something unusual, if you put the system online after 1/1/2009, you will have to wait until you file your 2009 income tax.

Re: New federal tax incentives (30%), can it be applied now?

sub3marathonman wrote: »

OK, I'm not a tax attorney, and will post the required "consult with your tax advisor."

However, from my understanding, here is how it works. No matter when you purchased your components, even if it was 10 years ago, what is important is the date you put the system into use. The IRS treats the components as being purchased on that date.

Now, for the rebate, the 30% applies to whatever amount is outstanding after all state and any other rebates (if applicable) are applied. So for example, if your $40K system had a state rebate of $16K, you would figure the 30% on the remaining $24K.

Now, unless you're doing something unusual, if you put the system online after 1/1/2009, you will have to wait until you file your 2009 income tax.

I will also add the "consult with your tax advisor" disclaimer.

My understanding is that it depends on what kind of rebates, if any, you received. If you received a state rebate, you may be able to choose to pay Federal income tax on the state rebate and claim the 30% Federal ITC on the total cost. So your choice would depend on which tax bracket you are in. If your rebate is from a utility, then it may be considered "subsidized energy financing" and you would need to subtract the utility rebate from the total cost before applying the 30% Federal ITC credit. If you receive a combination of both state and utility rebates, well..... like I said "Consult your tax advisor."

Scott.

Re: New federal tax incentives (30%), can it be applied now?

Hi guys, do know if this tax rebate aply to those off grid panels that I bough on the E-store? what about batteries and charge controllers purchased on the internet ? I mean, I have no receipt because I paid w/ credit card, what's the proof of purchase requirements to get the tax credit?....any advice?

thanks;)

Re: New federal tax incentives (30%), can it be applied now?

Mangas wrote: »

Are you saying if you put your system in say, three years ago, you can apply the 30% tax credit net of what you already received in State rebates in FY 2009?

If true, I like it.

False, unless you took 3 years to turn the system on, and turned it on after 1/1/2009. If you did not file for the credit when you turned your system on, you should be able to file an amended return for that year claiming the credit, but it would have the $2000 limit. For the OP, the good news is no $2000 limit, the bad news is the credit won't affect you until your 2009 taxes. On the whole, a good thing.

The old: 30% of your costs for an electric system, up to $2000.

30% of your costs for a thermal system, up to $2000, if not connected to a pool/hottub.

Total possible credit if doing both - $4000. The $2000 cap was only for homeowers - businesses just got 30%. The new rules extend the business treatment to homeowners.

Current: 30% of your costs for an electric system.

30% of your costs for a thermal system, if not connected to a pool/hottub.

In both cases there are some other requirements having to do with using approved components, having learned something from the solar credits of the late 1970's (lots of funky but not too functional equipment - shoddy, crappy water heating systems).

If the system does not remain installed/operational for some period of time, they can come get the money back from you, as far as I recall - like everyone else here, I'm neither a tax attorney or an enrolled agent, but I've been doing my own taxes for several decades. Being far from throwing the switch on my own system I have not run down all the details on this credit, but it beats the heck out of the state incentives available to me since it does not require inflating the cost of my system by having someone else install it (which the state incentives here require).

The thermal systems can be used for domestic hot water, or for heating the house, but sensible redirection of excess heat to a pool or hot-tub is forbidden - presumably because pools and hot tubs are viewed as luxury items not to be subsidized.

I would guess that using the credit might raise your profile for auditing by a huge amount, so make sure that your finances and records are in order and all aboveboard, and that your solar system is actually there and built and in compliance with whatever the actual requirements are. I could rather easily exceed the entire cost of my federal tax bill, and if that doesn't make auditing more likely, what would?

If you are pretty solidly certain about how things will come out with your 2009 income, and the costs of your system, you could start benefiting now by drastically reducing your federal withholding to account for the huge tax credit you'll have coming, rather than putting off your money (with no interest) until April of 2010. If you are vague on how it will turn out, better to wait for the gigantic refund, and file your 2009 taxes as early as you can in 2010.

Re: New federal tax incentives (30%), can it be applied now?

Ok, I was afraid of that wrinkle.

I should have realized they only tax you retroactively!

Re: New federal tax incentives (30%), can it be applied now?

Cariboocoot wrote: »

In general, tax credits apply to the year of the expenditure. Unless there is a specific retro-active clause in the legislation, equipment bought in 2008 can't be claimed under programs that begin in 2009. It doesn't matter when you "switch it on", just the date on the receipts.

This US Federal legislation does, in fact, apply to the date "placed in service" - thus, switched on. It's not retroactive (in that, if you switched on on 12/31/2008, you'd be limited to $2000) but it does treat the entire system cost as a lump at the time of switch on, from everything I have read. Other programs may have other rules.

Interesting point, how would one reduce the federal withholding?

Adjustments to withholding are made on your W4. Be absolutely certain you grasp what you are doing - the penalties for withholding too little are severe. While I refuse to pay the vultures that profit from the tax system being byzantine, you might want to if you have to ask this question.

Following the instructions for W4 will drive you nuts and probably get it wrong. Here's a link to a better method, though it's not exactly the method I use, it gets the same result and means I don't have to type pages of tax-related drivel.

http://www.taxmama.com/Articles-cur/w-4prsnl.html

You'd alter that JUST for 2009 by adding the credit amount to the amount already withheld. Remember to adjust it back UP for 2010 or you will be in a world of hurt in April of 2011. If you have not got your system up and running, be wary of anticipating, because sometimes things slip, and if it slips to 2010 then you won't have a credit for 2009. With a system that is turned on in 2009, if you are quite sure it meets all requirements to get the credit, you can probably be pretty sure of the credit amount. Just be careful to get it right.

If you are fully self-employed rather than employed by someone else, there's a whole other annoying ball of wax with estimated tax payments. In either case the result that's generally best is to get a small refund or make a small payment by having the total amount withheld closely match your actual tax.

Re: New federal tax incentives (30%), can it be applied now?

Since I have had a system running not technically tied to the grid and now I have all the part to set it up to do true grid tie and adding more panels. Does this mean the date it is technically grid tied is the startup date? And could I use the cost from everything that is in the system, assuming I have receipts for them?

I thought I had read you need some paperwork (tax form) from the installer or maybe that was for the grid tie part?

Re: New federal tax incentives (30%), can it be applied now?

Same here, well I didn't claim it in 2008, but even if I can claim what I am adding that would be worth it.

Re: New federal tax incentives (30%), can it be applied now?

I adjusted my W4 withholding a few weeks back; however, I am installing a $75,000 system which equates to a $22,500 tax credit which is difficult to recover with with-holding changes since even claiming EXEMPT won't cover it.