Solar tax credit question

[Subdood]

Hey all, I'm trying to get our taxes done, and am getting together the receipts for all the solar stuff I've installed. Got a few questions to ask:

1. I bought my inverter, panels and most of the infrastructure (wire, conduit, breaker panel, hardware, etc) in late 2022, and last year. My system went into service in about February of last year.

Can I take the credit for the stuff I bought in '22 to go into my 2023 tax returns? I understand you get the credit for when your system goes into service.

2. I bought a 5kwh rack mount battery last November and put it into service immediately. I bought it on an installment plan, do I get full credit for the battery, or what I have paid on it?

3. I bought my panels from Santan Solar in August of '22, put them in service in Feb last year. These panels were not used but had been bought by an installer but never put in service. Can I get the credit on these panels even tho I'm not the first owner?

4. I ran conduit to a critical loads circuit panel from my inverter. So is the panel, wires, conduit and the new breakers I installed in the panel eligible for the credit?

5. I paid state sales tax on all the stuff I bought. Can the tax be included in my reportable costs? Say the inverter cost me $1200, and the sales tax was $72 (KY sales tax rate). Do I get credit for the total $1272 or just the cost for the inverter alone?

6. Along those same lines, do I get credit for shipping costs? I'm guessing no, but wanted to ask anyways.

Thanks for your replies.

 

[Hedges]

I would take the full total of all those things, plus shipping, any permits, utility company fees, any documented money spent to make it work.

 

[Subdood]

So you would take credit on the panels even tho I wasn't the original owner?

I don't have a grid tie system so there's no permit or poco fees.

 

[Hedges]

Federal credits don't seem to require permits, compliance to code, anything. Except a few restrictions related to whether a pool is involved, the property being your residence, etc.

Equipment ownership changes hands many times from manufacturer, distributor, retailer. Sometimes something is sold, returned, restocked either open-box or sealed. Unless you find words about "ownership" in the tax laws, as opposed to "installation", "operation", etc., I wouldn't think that was disallowed.

An installer bought the panels. The panels he installed for a customer would get a credit or the customer who bought from him, not for the installer. You bought the panels from a reseller who bought from the installer. I don't see a problem.

I can't give tax advice, have no training in taxes or accounting. Just telling you what I would do.
The IRS guidelines have words you should be able to rely on. Sometimes, if you read the letter of the law, you will have a different interpretation you prefer.

 

[Tulex]

Supposedly you can't use the credit on used equipment, as it's possibly already been used for credit.
But, it doesn't matter when you buy stuff, it all qualifies for the tax year you put it into service.

 

[McKravitts]

Most installers use the date the equipment was first put into use, even if you paid for it in a previous year.
IRS tax code for solar credits is about as vague as all other tax laws.
You're probably safe if the equipment you purcahsed has never been used for a credit in the past.
One possible problem is that the IRS could say that the equipment purchase in previous years should be depreciated for the purpose of the credit.
For tax purposes the IRA assumes that solar equipment has a 5 year life.
Worst case senerio, you'd have to reduce the value of the equipment purchased in the previous year by 20 %.
The chance of an IRS audit is pretty bslime these days and even if they did audit you, the descrepncy would not lead to any penalties/

 

[Hedges]

Any discrepancy that resulted in increased tax liability would, I think, incur late payment penalties. Which are about as much as interest, not too bad.
(Late filing penalties are 10x as large, based on balance owed.)

Inventory would not be depreciated.

Where I do see difference for equipment purchased earlier year is vehicles. Used not for business at first, for business later. But PV panels are just materials staged for use.

 

[Subdood]

I would take the full total of all those things, plus shipping, any permits, utility company fees, any documented money spent to make it work.

Thanks for all the replies, folks.

So even tho I bought the battery on an installment plan last November, could I take full credit for it for the 2023 tax year? I did buy another 5kwh, but that was in February so I will take that credit on my 2024 returns.

I may end up not taking the credit on the panels, more of a conscience thing, than a legal one. If I'd known this beforehand I would've bought "new" ones.

I do our taxes every year, and it seems to be more of a pain each year. But, I am going to take advantage of this credit, it's one of the reasons I wanted to put a system in the first place.

 

[Hedges]

I think we can write off purchases the year we buy, even if we incur debt to buy it.
Lease, the year of the least payments. Apparently that is advantageous in some business cases, maybe accelerated vs. depreciation.

So far as I can tell, your panels were new. Bought by an installer in a large lot (include spares in case of damage) but not installed. The ones sold to his customer are eligible for credit by that customer. If I bought the remaining panels through some channel I would take credit on them. I would save a copy of the vendor's documentation indicating they are unused.

The purpose of the credit is to encourage solar installation. Or to give a windfall to businesses selling solar. Thank you for doing as Congress intended.

 

[Subdood]

I think we can write off purchases the year we buy, even if we incur debt to buy it.
Lease, the year of the least payments. Apparently that is advantageous in some business cases, maybe accelerated vs. depreciation.

So far as I can tell, your panels were new. Bought by an installer in a large lot (include spares in case of damage) but not installed. The ones sold to his customer are eligible for credit by that customer. If I bought the remaining panels through some channel I would take credit on them. I would save a copy of the vendor's documentation indicating they are unused.

The purpose of the credit is to encourage solar installation. Or to give a windfall to businesses selling solar. Thank you for doing as Congress intended.

The panels had some minor scuffs on the frames but otherwise were never installed. That's what was on the web page when I bought them, but didn't save that info. Maybe I can ask Santan to send me some kind of documentation attesting to that fact.

 

[Tulex]

The panels had some minor scuffs on the frames but otherwise were never installed. That's what was on the web page when I bought them, but didn't save that info. Maybe I can ask Santan to send me some kind of documentation attesting to that fact.

If they were never installed, a credit couldn't have been applied to them, so you should qualify for the credit. I think when they say used, they mean second hand from a previous install. Having purchased from a solar dealer, you should be fine.

 

[millsan1]

As for my understanding, the federal credit is based on the cost of the system. So, in my reading, anything that went into the cost is included, shipping, tax, whatever.

Credit can be taken the year system goes into operation, regardless of when equipment was purchased.

Used/new, cash, card, wampum, none of that matters.

Again, my understanding.

 

[Subdood]

If they were never installed, a credit couldn't have been applied to them, so you should qualify for the credit. I think when they say used, they mean second hand from a previous install. Having purchased from a solar dealer, you should be fine.

Thanks that makes sense. Can't get credit for something that wasn't installed.

If they were used and sold by Santan as such, then I wouldn't expect to take credit for those.

 

[Subdood]

As for my understanding, the federal credit is based on the cost of the system. So, in my reading, anything that went into the cost is included, shipping, tax, whatever.

Credit can be taken the year system goes into operation, regardless of when equipment was purchased.

Used/new, cash, card, wampum, none of that matters.

Again, my understanding.

Thanks. I just googled the shipping and sales tax issue, and an Alt-E article said sales tax, and shipping could be included, along with the equipment. My battery had free shipping but the panels and inverter did not. That was about a $300 charge to ship the panels, so I'm definitely including that.

 

[teal95]

My understanding is for DIY, tools also count towards the deductible expenses.

 

[Subdood]

Ok, I wonder if I can include all the labor I put into this..

The question is, how much would I pay me??

 

[Rocketman]

Those panels do qualify because they are new - “not used”.

Shipping, taxes and labor paid is all included in the cost of the project.

The entire project that is part of the solar/battery project is available for the credit. So the conduit to the critical load panel, the backhoe rental to dig the trench to put the conduit in are both part of the solar tax credit - as long as the are needed for the project.

The date placed in service is the date that matters for the IRS - so it doesn’t matter if you buy the panels in 2021, buy more stuff in 2022 and more in 2023 - when you finally install it all in 2024 - that is the year you can claim the credit.

If you pay yourself you can claim the labor - but then you have to pay income taxes on that labor and both sides of FICA & Medicare… you will be very far behind. (You don’t count labor - I meant this part as humor).

Also, if you pay for it on credit you claim the cost of the unit in the year installed. Finance costs - interest- is not part of the system. So no Solar Tax Credit for interest.

 

[B-Mod]

Ok, I wonder if I can include all the labor I put into this..

The question is, how much would I pay me??

Not your labor, you can't count that.

 

[plympton]

Ok, I wonder if I can include all the labor I put into this..

The question is, how much would I pay me??

As far as I know, nope. Unless you happen to have a business set up, and the business installed it, and the business paid you, and the business invoiced... you?

If you find out otherwise, I'm all ears!

 

[Subdood]

Yeah, I know I can't get credit my labor, I was being a bit facetious. Or is it fecetious?

Thanks again for all the replies. This makes it a lot clearer for me. Using TaxSlayer, it seems to be a decent platform.