30% tax deduction

Eric ErnstEric Ernst Registered Users Posts: 16
Has anyone seen rules promulgated for the new tax deduction for solar? I'm pretty close to finalizing my design but don't want to start buying equipment until I'm sure that the tax break is real, and that I understand the rules. i.e. what is deductible, what records you need to keep, etc.
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Comments

  • dlenoxdlenox Solar Expert Posts: 42
    Re: 30% tax deduction

    Eric,

    Yes - it is real!
    Last year there was a cap, but not this (and future) years! I got the credit last year and re-invested it into a solar array to round out my wind turbine.

    I have a copy of the tax form on my website here

    Dan Lenox
  • Eric ErnstEric Ernst Registered Users Posts: 16
    Re: 30% tax deduction

    Thanks Dan,

    From the instructions, it doesn't look like they ask for any documentation. I guess you just have to cover yourself by saving receipts etc in case you get audited.

    I wonder if one could claim any credit for labor on a do it yourself installation. If I hired a contractor labor would be a major part of the project cost.
  • BB.BB. Super Moderators, Administrators Posts: 29,811 admin
    Re: 30% tax deduction

    If the labor rule is similar to other tax rules... For example, if you manage your own rental unit and do some work on it (paint, unplug toilet, etc.), you cannot deduct your time because you never claimed income on your time if the first place.

    "Pay" yourself $50 per hour (plus payroll and income taxes, etc.)--then you maybe could deduct your time--but otherwise not. (paying SSI+income taxes on your time, then getting a tax credit is probably a net loss for most people anyway).

    -Bill
    Near San Francisco California: 3.5kWatt Grid Tied Solar power system+small backup genset
  • Eric ErnstEric Ernst Registered Users Posts: 16
    Re: 30% tax deduction

    What you say makes good sense, Bill. Once you have done all of the work to record, report, and then pay the taxes, it wouldn't be worth it.
  • dlenoxdlenox Solar Expert Posts: 42
    Re: 30% tax deduction

    B.B.

    I didn't go through the hassle of paying myself for my time I would be worried that this could cause a red flag if audited. But if you do this be sure to physically write out a check to yourself and cash it, may be a small point but proof of payment.

    And besides, last year there was a $4k cap and since everything in my system was installed I made it up to the maximum cap. This year there is no cap!

    This tax credit can take into consideration *all* aspects of the installation, from laying conduit, pouring cement, towers, trackers, inverter, battery bank, cable, etc, not just PV panels or the wind turbines themselves.

    When you add up all the costs it accumulates pretty fast.

    I did not have to document my tax credit, but I did save all of the receipts!

    Dan Lenox
  • System2System2 Posts: 6,290 admin
    Re: 30% tax deduction

    Just wanted to clarify...the title says tax deduction.

    The 30% is a federal tax credit (meaning dollar to dollar). The credit can now actually be taken as a grant from the US Treasury.

    -Aaron
    http://www.greentechrs.com
  • SSofAZSSofAZ Registered Users Posts: 8
    Re: 30% tax deduction

    The tax deduction is only available in grant form for commercial projects, not residential. In addition, the Treasury has been VERY slow to issue the grants. We've had a 60kW system on hold since April. In addition, be very careful if your state or utility offers rebates on the system cost. Those rebate will effect the tax credit one way or another.
  • System2System2 Posts: 6,290 admin
    Re: 30% tax deduction

    Eric,
    Here is the Faq we use regarding the tax rebate. There is currently no cap on this! It's good for both solar and wind.
    http://www.akwindindustries.com/4.php

    Regards,

    Erik S.
  • GreenerPowerGreenerPower Solar Expert Posts: 264 ✭✭✭✭✭✭
    Re: 30% tax deduction

    There is a page on this from WindSun main site:
    http://store.solar-electric.com/soentaxcr.html
    GP
  • mshen11mshen11 Solar Expert Posts: 185 ✭✭✭✭✭
    Re: 30% tax deduction
    dlenox wrote: »
    I didn't go through the hassle of paying myself for my time I would be worried that this could cause a red flag if audited. But if you do this be sure to physically write out a check to yourself and cash it, may be a small point but proof of payment.


    if you did write yourself a check, youre going to have to pay income tax on that portion or you'd get audited. so im sure you can write it off - but is it worth all the addition paperwork, federal and state tax? in the end you probably dont gain anything from it.
  • strawbalestrawbale Solar Expert Posts: 29 ✭✭✭
    Re: 30% tax deduction

    First post--

    I am getting conflicting information on whether the 30% federal tax credit is figured on full price or after deducting grants. We have a 7kw system on order. Full installed price is $47,000. We will be receiving about $30,000 in grants-- $2.25/kw from the PA Sunshine Grant and $2.00/kw from our utility company.

    strawbale
  • WindsunWindsun Solar Expert Posts: 1,164 ✭✭
    Re: 30% tax deduction
    strawbale wrote: »
    First post--

    I am getting conflicting information on whether the 30% federal tax credit is figured on full price or after deducting grants. We have a 7kw system on order. Full installed price is $47,000. We will be receiving about $30,000 in grants-- $2.25/kw from the PA Sunshine Grant and $2.00/kw from our utility company.

    strawbale

    It is basically on YOUR out of pocket costs, so you get the tax credit on what the cost was minus any of those other credits, grants, gifts, whatever.
  • strawbalestrawbale Solar Expert Posts: 29 ✭✭✭
    Re: 30% tax deduction
    Windsun wrote: »
    It is basically on YOUR out of pocket costs, so you get the tax credit on what the cost was minus any of those other credits, grants, gifts, whatever.

    I asked my installer about this again last week and he assured me the federal tax credit is on the full price, pre grants, etc. Can you direct me to any documentation that states this clearly so I can show it to him? Thanks!

    Strawbale
  • WindsunWindsun Solar Expert Posts: 1,164 ✭✭
    Re: 30% tax deduction

    I can't find the exact IRS statement, but the key phrase is "A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States and used as a residence by the taxpayer."
    http://www.irs.gov/pub/irs-drop/n-09-41.pdf

    http://www.irs.gov/newsroom/article/0,,id=206875,00.html

    In other words, if you got a $50,000 system and with all the grants etc your expenditures were $30,000, that is what you can claim.

    I have heard the theory that you could take the entire deduction, and then claim the grants as income - but I am not sure that would fly past the IRS. But the fact is, the language in the bill out of congress was a bit (!) vague. I doubt that the IRS really knows how to handle it just yet - the info on the IRS website is a bit vague.
  • mshen11mshen11 Solar Expert Posts: 185 ✭✭✭✭✭
    Re: 30% tax deduction

    if you deduct the full price then you should be reporting your grants as income... otherwise the IRS DEFINITELY wont like it
  • strawbalestrawbale Solar Expert Posts: 29 ✭✭✭
    Re: 30% tax deduction

    Right. Our installer did say that the PA Sunshine Grant is federally taxed, but the one from the utility company is not.

    Since our system will not be installed until next year I am assuming things will be a bit clearer by the time we file our 2010 taxes.

    Your responses have been helpful.

    Strawbale
  • solarteksolartek Solar Expert Posts: 69 ✭✭✭✭
    Re: 30% tax deduction

    Here is an interesting article by Andy Black from OnGrid Solar that talks about the economics of solar electric systems. In addition to the wealth of great information in the article, he has a good discussion of the taxability of grants, rebates, and buybacks starting on page 9.

    http://www.ongrid.net/papers/PaybackOnSolarSERG.pdf

    Scott.
  • benjam47benjam47 Registered Users Posts: 10
    Re: 30% tax deduction
    solartek wrote: »
    Here is an interesting article by Andy Black from OnGrid Solar that talks about the economics of solar electric systems. In addition to the wealth of great information in the article, he has a good discussion of the taxability of grants, rebates, and buybacks starting on page 9.

    http://www.ongrid.net/papers/PaybackOnSolarSERG.pdf

    Scott.

    Fantastic article!

    Anyone know if upgrading my main electricial panel, which I did prior to my solar installation in expectation of it, can be included in the federal 30% credit?
  • Still learningStill learning Registered Users Posts: 18
    Re: 30% tax deduction

    I guess my question is this, if I purchase 5 thousands dollars in equipment, and I get that part and installed around the first of March of 2010 and wanted to add to add about 5 thousand dollars in equipment in the next six monts, and everything has been purchased within the 2010 tax year, would I be able to calm the whole 10,000 dolars for the equipment? The reason I am asking is that I am going to have to purchase equipment in about every six months or a little less to reach the total wattage I would need. But to be honest I would have to make these 6 month purchased into 2011 aslo.
  • WindsunWindsun Solar Expert Posts: 1,164 ✭✭
    Re: 30% tax deduction

    Hard to say for sure what the IRS thinks, but from what we can figure out, the credit is a one time credit, for that particular year.

    It says nothing about in how many stages that system is installed in, so presumably you could use the entire system cost actually spent in 2010.
  • strawbalestrawbale Solar Expert Posts: 29 ✭✭✭
    Re: 30% tax deduction

    Similarly, we are making an $8,000 deposit on our system this year. It will be installed as soon as weather permits in the new year. I am assuming we can use the 30% federal tax credit from the deposit when completing our '09 federal tax return.

    Strawbale
  • WindsunWindsun Solar Expert Posts: 1,164 ✭✭
    Re: 30% tax deduction

    Actually no, I don't think so. Since the money was not actually "spent" until next year.
  • solarteksolartek Solar Expert Posts: 69 ✭✭✭✭
    Re: 30% tax deduction

    To take the federal tax credit, the equipment must be "placed in service" by the end of the tax year so a deposit on a system would not count.

    Scott.
  • strawbalestrawbale Solar Expert Posts: 29 ✭✭✭
    Re: 30% tax deduction
    solartek wrote: »
    To take the federal tax credit, the equipment must be "placed in service" by the end of the tax year so a deposit on a system would not count.

    Scott.

    That sounds definitive. Thanks.

    Strawbale
  • GreenPowerManiacGreenPowerManiac Solar Expert Posts: 453 ✭✭✭
    Re: 30% tax deduction

    The federal renewable energy tax credit details will be IRS form 5695 for 2009, but it's still in rough draft. There are so many changes with taxes this year, I'd wait until next year to even think about it. http://dsireusa.org is where your state rebates are, if applies.

    The state does things differently. It's not actually 30% off of top for Illinois. What they do is critique the component list and deduct the state sales tax, Coffee & Doughnut fees, and any other BS that doesn't apply like special permits. I'm ending up getting about a 25% rebate check.

    The next thing to consider is how you'll be using those Fed tax credits. I'll have about 10k worth this year. When the household Fed withheld tax is much less than that, then you have to rollover the remaining amount over the next year or three. This produces a nice tax return, however, most of us these days need all the money NOW ! I'm going to rollover my IRA into a Roth IRA to eat up any remaining tax credits so none will be used for following years. What's nice is that the state of Illinois does not charge State Tax on rollovers on the tax returns ! Check with your local CPA or tax adviser to see if the same rules apply.

    Best to wait until next year. You've got all winter to make plans and ask questions.....
    Nature's Design & Green Energy on FaceBook : Stop by and "Like" us anytime.. Many up-to-date articles about Renewables every day.
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  • VicVic Solar Expert Posts: 2,976 ✭✭✭✭
    Re: 30% tax deduction

    solartek,

    Thanks for the great article link. ! Very interesting. Am not GT now, but still very interesting. Thanks, All the best for the Holidays and the New Year.

    AND, Thanks to NAZ Wind & Sun for this TERIFFIC site ! Vic
    Off Grid - Two systems -- 4 SW+ 5548 Inverters, Surrette 4KS25 1280 AH [email protected], 11.1 KW STC PV, 4X MidNite Classic 150 w/ WBjrs, Beta KID on S-530s, MX-60s, MN Bkrs/Boxes.  25 KVA Polyphase Kubota diesel,  Honda Eu6500isa,  Eu3000is-es, Eu2000,  Eu1000 gensets.  Thanks Wind-Sun for this great Forum.
  • bobdogbobdog Solar Expert Posts: 191 ✭✭
    Re: 30% tax deduction

    Going to bring this back to the front even though it is an old thread. However, now that there has been a couple of years of using the credits by folks I thought I'd ask my question now.

    I would like to take the credit for my second home which has an off grid system which was placed in service in 2010. Can that be done first off?

    Then I would like to take the credit for my main home for 2011, for a grid tie system. I know that can be done, but can I take the credit for both homes even though they are in separate years or does the IRS consider that double dipping?

    Thanks.

    Tim
  • solar_davesolar_dave Solar Expert Posts: 2,347 ✭✭✭✭
    Re: 30% tax deduction
    bobdog wrote: »
    Going to bring this back to the front even though it is an old thread. However, now that there has been a couple of years of using the credits by folks I thought I'd ask my question now.

    I would like to take the credit for my second home which has an off grid system which was placed in service in 2010. Can that be done first off?

    Then I would like to take the credit for my main home for 2011, for a grid tie system. I know that can be done, but can I take the credit for both homes even though they are in separate years or does the IRS consider that double dipping?

    Thanks.

    Tim

    While I am not a tax attorney, here is the first lines of form 5695:
    Were the qualified energy efficiency improvements or residential energy property costs for your main home located in the United States? (see instructions) ............▶

    Caution: If you checked the “No” box, you cannot claim the nonbusiness energy property credit. Do not complete Part I.

    From the instructions:
    Main home. Your main home is generally the home where you live most of the time. A temporary absence due to special circumstances, such as illness, education, business, military service, or vacation, will not change your main home.

    I would say NO because of the clause "main home". I read that as primary residence. Perhaps a tax attorney could make a case for 50% occupancy at each location however. There is nothing stopping you from taking the credits in the years that you use them on your main home. I added 2160 watts of panels and took that as an additional credit. Also you can roll the excess credits over to the following year.
  • sub3marathonmansub3marathonman Solar Expert Posts: 300 ✭✭✭
    Re: 30% tax deduction
    solar_dave wrote: »
    Also you can roll the excess credits over to the following year.

    You can actually keep rolling the excess credits year after year, until they expire in I believe 2016. You also MUST take the solar credit before taking other credits, so it is possible based on certain incomes that a person would not benefit from all the (non-solar) credits somebody with a higher income would have. It really depends on your individual situation, that is why either you have to calculate everything or have a tax attorney do it.
  • schmidtye30schmidtye30 Registered Users Posts: 7
    Re: 30% tax deduction

    I had two quick questions on the tax subject (which i dont think have been answered in this thread unless i missed it)

    1. Are there any stipulation on systems needing to be installed by 'licensed contractors' or are you still eligible for the credit if you do the install yourself (Im planning to at least install the panels myself).

    2. What is your tax liability ( in reference to "If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year").
    I assume this just means your tax liability before deductions, etc?
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