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

Geek
Geek Solar Expert Posts: 32
Just trying to understand.
My system was made 'live' this month. According to new legislation we (homeowners) now don't have a cap of $2k dollars but 30% like business installs.

I am currently doing my taxes with turbo tax and see I enter info like if system was done last year and get a tax rebate of the 'older' $2k incentive.

Can my system be claimed for tax incentive using the new legislation or I will need to do this next year? Is the tax rebate a one shot thing or it has to be 'pro-rated' in a few years to get the full rebate, in my case around $5k dollars or more.

Also, the total cost of my system was close to $40k but the out of my pocket is only around $18k with the permit fees. The blurb I saw on sun-wind's website mentions that the qualify amount is the total cost of the system...........doesn't make sense to claim a credit based on $40k, that would make the rebate $12k...!!

C/P:
"From IRS Form 5695: Residential Energy Efficient Property Credit
You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. This includes labor costs properly allocable to the onsite preparation, assembly, or original installation of the property and for piping or wiring to interconnect such property to the home."

Can someone shed some light on this please.
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Comments

  • sub3marathonman
    sub3marathonman Solar Expert Posts: 300 ✭✭✭
    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.
  • Geek
    Geek Solar Expert Posts: 32
    Re: New federal tax incentives (30%), can it be applied now?

    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.

    That's what I first thought also, just making sure, let's see what others reply.

    Thanks for the feedback,
  • solartek
    solartek Solar Expert Posts: 69 ✭✭✭✭
    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.

    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.
  • Mangas
    Mangas Solar Expert Posts: 547 ✭✭✭✭
    Re: New federal tax incentives (30%), can it be applied now?

    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.
    Ranch Off Grid System & Custom Home: 2 x pair stacked Schneider XW 5548+ Plus inverters (4), 2 x Schneider MPPT 80-600 Charge Controllers, 2 Xanbus AGS Generator Start and Air Extraction System Controllers, 64 Trojan L16 REB 6v 375 AH Flooded Cel Batteries w/Water Miser Caps, 44 x 185 Sharp Solar Panels, Cummins Onan RS20 KW Propane Water Cooled Genset, ICF Custom House Construction, all appliances, Central A/C, 2 x High Efficiency Variable Speed three ton Central A/C 220v compressors, 2 x Propane furnaces, 2 x Variable Speed Air Handlers, 2 x HD WiFi HVAC Zoned System Controllers
  • homerramirez
    homerramirez Solar Expert Posts: 102 ✭✭
    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;)
  • Geek
    Geek Solar Expert Posts: 32
    Re: New federal tax incentives (30%), can it be applied now?
    solartek wrote: »
    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.

    I got state rebate, the solar company took care of all paperwork for me.
    So I guess I better don't claim anything now and wait until next year return to file based on the new legislation.

    ..
  • Ecnerwal
    Ecnerwal Solar Expert Posts: 101 ✭✭
    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.
  • sub3marathonman
    sub3marathonman Solar Expert Posts: 300 ✭✭✭
    Re: New federal tax incentives (30%), can it be applied now?
    solartek wrote: »
    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.

    I had never heard of this possibility. Does that mean that if you are in a lower than 30% federal tax bracket you can instead list the state rebate as income, and then pay tax on it as ordinary income?

    If so, could somebody provide a quote or link from the IRS describing this?
  • Mangas
    Mangas Solar Expert Posts: 547 ✭✭✭✭
    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!
    Ranch Off Grid System & Custom Home: 2 x pair stacked Schneider XW 5548+ Plus inverters (4), 2 x Schneider MPPT 80-600 Charge Controllers, 2 Xanbus AGS Generator Start and Air Extraction System Controllers, 64 Trojan L16 REB 6v 375 AH Flooded Cel Batteries w/Water Miser Caps, 44 x 185 Sharp Solar Panels, Cummins Onan RS20 KW Propane Water Cooled Genset, ICF Custom House Construction, all appliances, Central A/C, 2 x High Efficiency Variable Speed three ton Central A/C 220v compressors, 2 x Propane furnaces, 2 x Variable Speed Air Handlers, 2 x HD WiFi HVAC Zoned System Controllers
  • Cariboocoot
    Cariboocoot Banned Posts: 17,615 ✭✭✭
    Re: New federal tax incentives (30%), can it be applied now?

    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. Check the specific wording of the bill: it may apply to the prior tax year.
    This is what I do, but in Canada not the US. We've just been handed a whole new can of worms in tax legislation. As if the Government didn't screw up enough on the current laws.:grr
  • Geek
    Geek Solar Expert Posts: 32
    Re: New federal tax incentives (30%), can it be applied now?
    Ecnerwal wrote: »
    ....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.

    Interesting point, how would one reduce the federal withholding?
  • BB.
    BB. Super Moderators, Administrators Posts: 33,431 admin
    Re: New federal tax incentives (30%), can it be applied now?

    W4 Form with your employer... There is an IRS W4 Calculator.

    Some warnings... Many people are hit by the Alternative Minimum Income Tax (Federal)... The simple W4 calculator does not account for that.

    A second warning... There are now very heavy penalties possible for under withholding taxes (in California too).

    I don't suggest you claim 99 children until you understand what may happen at the end of the year when your taxes are due.

    I don't like paying taxes and withholding... But until the Rangel Rule is passed by congress--the interest and penalties are a killer.
    Rep. John Carter, a Texas Republican, sent out a press release earlier today about his innovative new bill: "Rangel Rule"
    All U.S. taxpayers would enjoy the same immunity from IRS penalties and interest as House Ways and Means Chairman Charles Rangel (D-NY) and Obama Administration Treasury Secretary Timothy Geithner, if a bill introduced today by Congressman John Carter (R-TX) becomes law.
    Carter, a former longtime Texas judge, today introduced the Rangel Rule Act of 2009, HR 735, which would prohibit the Internal Revenue Service from charging penalties and interest on back taxes against U.S. citizens. Under the proposed law, any taxpayer who wrote “Rangel Rule” on their return when paying back taxes would be immune from penalties and interest.
    We made a simple $1,000 mistake a couple decades ago (line 47, box 2a if income is over xx,xxx, then deduction in form 920, line 17, box 37 b is reduced by the amount listed in form 1040, line 42, box 1c--unless otherwise stated).

    This was a simple mistake that the IRS would have found when they entered the data--I swear that they waited 2 years 364 days before sending us the notice--which tripled the amount due (penalties and interest).

    -Bill
    Near San Francisco California: 3.5kWatt Grid Tied Solar power system+small backup genset
  • Ecnerwal
    Ecnerwal Solar Expert Posts: 101 ✭✭
    Re: New federal tax incentives (30%), can it be applied now?
    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.
  • solartek
    solartek Solar Expert Posts: 69 ✭✭✭✭
    Re: New federal tax incentives (30%), can it be applied now?
    I had never heard of this possibility. Does that mean that if you are in a lower than 30% federal tax bracket you can instead list the state rebate as income, and then pay tax on it as ordinary income?

    If so, could somebody provide a quote or link from the IRS describing this?

    Here is a link to a Berkeley Lab and Clean Energy States Alliance case study of the tax implications of the latest version of the ITC: http://eetd.lbl.gov/ea/emp/cases/res-itc-report.pdf. There is also an earlier case study at the same site of the implications of the earlier version of the ITC.

    Also, the Solar Energy Industry Alliance (SEIA) here has updated their tax guidance manual based on the recent changes to the ITC. It is available for free, however, only to members of the SEIA.

    A careful reading of the Berkeley Lab study shows that the IRS is not even sure whether the rebates should be considered taxable or non-taxable. So some installers I spoke to at the Solar Power International conference this past October are telling customers that it is there choice how to treat the rebates. For me, based in Florida, I know that the state rebate comes from general revenue, so I tell prospective customers that they should be able to take the ITC on the full cost of the system but they will owe Federal income tax on the state rebate they receive. (If they ever receive a state rebate given the pitiful funding of the program here in Florida.)

    Scott.
  • Brock
    Brock Solar Expert Posts: 639 ✭✭✭✭
    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?
    3kw solar PV, 4 LiFePO4 100a, xw 6048, Honda eu2000i, iota DLS-54-13, Tesla 3, Leaf, Volt, 4 ton horizontal geothermal, grid tied - Green Bay, WI
  • Ecnerwal
    Ecnerwal Solar Expert Posts: 101 ✭✭
    Re: New federal tax incentives (30%), can it be applied now?

    The form and instructions for 2008, which include a little info on 2009:

    http://www.irs.gov/pub/irs-pdf/f5695.pdf
  • SavingEnergy
    SavingEnergy Registered Users Posts: 9
    Re: New federal tax incentives (30%), can it be applied now?

    Ok, how about this question (I realize that none of you are professional tax advisors). Lets say I installed, activated, and claimed the full $2000 federal credit for a small system in 2008. In 2009, I decide that I would like to add to that same system, so I install and activate another $10K worth of equipment. Can I claim a $3K credit in 2009, after having claimed a $2K credit in 2008?

    Thanks for any comments.
  • poleikleng
    poleikleng Solar Expert Posts: 29
    Re: New federal tax incentives (30%), can it be applied now?
    Ok, how about this question (I realize that none of you are professional tax advisors). Lets say I installed, activated, and claimed the full $2000 federal credit for a small system in 2008. In 2009, I decide that I would like to add to that same system, so I install and activate another $10K worth of equipment. Can I claim a $3K credit in 2009, after having claimed a $2K credit in 2008?

    Thanks for any comments.

    I too have the same question, has this been addressed?
  • Brock
    Brock Solar Expert Posts: 639 ✭✭✭✭
    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.
    3kw solar PV, 4 LiFePO4 100a, xw 6048, Honda eu2000i, iota DLS-54-13, Tesla 3, Leaf, Volt, 4 ton horizontal geothermal, grid tied - Green Bay, WI
  • System2
    System2 Posts: 6,290 admin
    Re: New federal tax incentives (30%), can it be applied now?

    This is definately a confusing topic, to make it worse some of the literature some companies are distributing are claiming that the 30% entitles you to claim the full cost of the system.

    I would disagree with this but I am not a tax professional, it does seem to me the people posting before me are right, if you claim the rebate as income you can claim the 30% credit. For most people installing the system is hardly seems worth the hassle though, or the possible complications in case of an audit.

    1a. Links to sites with advertising, especially those with numerous Adsense or other paid advertisements of any type are subject to editing or deletion on a case by case basis. We are not part of your link farm for pay-per-click advertising sites
  • System2
    System2 Posts: 6,290 admin
    Re: New federal tax incentives (30%), can it be applied now?
    Ok, how about this question (I realize that none of you are professional tax advisors). Lets say I installed, activated, and claimed the full $2000 federal credit for a small system in 2008. In 2009, I decide that I would like to add to that same system, so I install and activate another $10K worth of equipment. Can I claim a $3K credit in 2009, after having claimed a $2K credit in 2008?

    Thanks for any comments.

    I am not a tax professional, but it seems to me you can claim the new credit, for newly installed equipment.

    1a. Links to sites with advertising, especially those with numerous Adsense or other paid advertisements of any type are subject to editing or deletion on a case by case basis. We are not part of your link farm for pay-per-click advertising sites
  • foosman
    foosman Solar Expert Posts: 38
    Re: New federal tax incentives (30%), can it be applied now?

    I have been researching the new 30% tax credit and believe that several statements made by posters are misleading or wrong. You can claim the 30% tax credit on the full amount prior to any Federal, State or local rebates if the principal purpose of the rebate is to provide subsidized financing for projects designed to produce or conserve energy (http://www.sutherland.com/files/News/acc4c4ef-b551-47a7-90e1-ba8c3a603e3d/Presentation/NewsAttachment/6e28ef57-ff76-467e-a6d9-bf325c4dd46d/ENAlertStimulasBill2.16.09.pdf) . "Subsidized financing" = assisting with funds or in other words a rebate.

    PLEASE NOTE: this is a specific change adopted on Feb. 13th with the passing of the "American Recovery and Reinvestment Act". Prior to this, if you received a rebate "a.k.a- subsidized financing", you had to reduce your basis by this amount and could not receive a 30% discount off the full system price. In other words: prior to this year you got 30% off what "you paid". Now, it is possible to get 30% back from the total system price.

    One other interesting tidbit. You don't need to wait until tax time to receive the credit. You can also submit a grant application and get the refund within 60 days. My solar installer is looking into this.
  • Geek
    Geek Solar Expert Posts: 32
    Re: New federal tax incentives (30%), can it be applied now?
    foosman wrote: »

    One other interesting tidbit. You don't need to wait until tax time to receive the credit. You can also submit a grant application and get the refund within 60 days. My solar installer is looking into this.

    That would be great, if you get any info on this I'd appreciate if you can share.....
  • Solar Guppy
    Solar Guppy Solar Expert Posts: 1,989 ✭✭✭
    Re: New federal tax incentives (30%), can it be applied now?

    http://www.dsireusa.org/library/includes/incentive2.cfm?Incentive_Code=US53F&State=federal&currentpageid=1&ee=0&re=1

    http://www.treas.gov/recovery/docs/Grants_Specified-Energy-Property.pdf
    foosman wrote: »
    One other interesting tidbit. You don't need to wait until tax time to receive the credit. You can also submit a grant application and get the refund within 60 days. My solar installer is looking into this.

    Looks like residential installations PV are NOT included for the grant option that would qualify for the 30% tax credit, business and residential with feed PTC are eligible but there is not yet any place to apply for these grants, looks like July is the target for getting stuff online for this program
  • Geek
    Geek Solar Expert Posts: 32
    Re: New federal tax incentives (30%), can it be applied now?

    too bad residential installs don't qualify......:grr
  • Solar Guppy
    Solar Guppy Solar Expert Posts: 1,989 ✭✭✭
    Re: New federal tax incentives (30%), can it be applied now?

    Since there currently isn't an active grant option as they are still in process of getting the program together, your looking at a maximum difference of a few months tops ( getting say in September vs January using the 1040 method of tax credits and only if the July target is met!)

    Also, anyone that installs a system and knows your tax liability will be less can simply adjust W4 withholding and receive immediately some the the savings
  • Geek
    Geek Solar Expert Posts: 32
    Re: New federal tax incentives (30%), can it be applied now?

    thanks gupy,

    is just that I always get a good $ return from uncle sam every year, adding this to next year income tax paperwork will be a BIG $$ return, I'm expecting my solar tax rebate to be around $5k, so altogether the return would be a lot...uncle sam may feel suspicious and may trigger an audit....:cool::cool:
    I prefer getting a grant before including in my tax return next year, if possible.

    even though my stuff is correct.....but I've never been though an audit and will never want to be anyways....:roll:
  • Solar Guppy
    Solar Guppy Solar Expert Posts: 1,989 ✭✭✭
    Re: New federal tax incentives (30%), can it be applied now?

    So if your 100% sure you'll install the solar by year end, bump up your with holdings now ... you will every week ( or whatever your pay period is ) start getting the "credits" now, no reason to wait 3-5 months for some yet define grant program. Very simple to do just submit an new W4 to your employer

    For anyone considering this, its completely legal, just be vary careful to to not over withhold for the 2009 tax year ( own money at tax time ) ... if you do then you get into penalty's with the IRS
  • foosman
    foosman Solar Expert Posts: 38
    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.
  • Dave Angelini
    Dave Angelini Solar Expert Posts: 6,728 ✭✭✭✭✭✭
    Re: New federal tax incentives (30%), can it be applied now?

    On this subject but slightly off, if you claimed the Federal credit 2 years ago, could you add more solar and do it again?:roll:
    "we go where power lines don't" Sierra Nevada mountain area
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