Federal Tax Credit and additional discounting

[solarbuff]

Hello everyone,

We recently got multiple quotes for 3 kW PV residential system installation in California. Most of them are in the same ballpark for comparable panels/inverters.

However the net cost on one quote is substantially less than others. The reason is because they have done something like this:

Total contract price = $20,000
30% federal solar tax credit = $6,000
Post-installation credits/discounts = $8,000
Net cost = $20,000 - $6,000 - $8,000 = $6,000

While all others have factored in the 30% federal tax credit only AFTER applying all incentives/discounts etc., kinda like:

Total contract price = $20,000
Installation credits/discounts = $8,000
Final contract price = $20,000 - $8,000 = $12,000
30% tax credit on $12,000 = $3,600
Net cost = $12,000 - $3,600 = $8,400

Clearly the first quote looks erroneous, hence significantly lower than the rest. But when I reconfirmed with the sales rep if this was a simple error, he said NO, and stood by the first quote, saying their discounts are applied AFTER the installation to maximize the tax credit. He mentioned this approach was relatively common in the industry.

Is this true? Please share your experiences.

Thank you!!
Sam

[Volusiano]

First of all, I need to qualify that I'm no tax advisor. This is just my personal opinion and not a professional tax advisor opinion.

If the credit is like an incentive rebate from the POCO and your POCO gives that money directly to the contractor and you pay the contractor a lower final price that reflects that credit already, then you should only claim 30% of what you pay the contractor. If you pay the contractor the higher price and get reimbursed later by the POCO for the credit, then you can probably claim 30% of what you pay the contractor, but will also have to file that credit you receive from the POCO as a taxable income you receive.

If the credit is from the contractor themselves, then I think you need to factor that in as part of your final price for the system and you can only claim 30% of the final price. I don't think the IRS differentiates between pre or post installation discounts. The IRS only cares about the final amount you write on your check to the installer in the end. I think playing the game of jacking up the price up front for the 30% credit then slipping in post-installation discount under the table to the homeowner later to avoid showing it on the book is called cheating the IRS.

I got a $500 discount from my installer for signing up with them within a certain amount of time after their quote, and it was taken off up front and the bill they presented me with my final price already had their discount built in. That's how it should be in my opinion.

Of course state tax incentive is another matter and does not have to be taken off the contract price before the 30% federal credit is claimed. We're just talking about discount from the contractor here. But even from the perspective of the state tax credit, next year when you file your 2014 tax return, that state tax credit for your solar is going to be considered as taxable income from a state refund on your federal tax return anyway.

[DaylanDarby]

http://www.irs.gov/pub/irs-pdf/f5695.pdf (FOR 2013!!!!) Who know what next years will be

[Volusiano]

http://www.irs.gov/pub/irs-pdf/f5695.pdf (FOR 2013!!!!) Who know what next years will be

I think the tax credit and carry over will continue to be available until 2016. Then who knows after that.

[russ]

The one guy seems to be playing verbal games. Everything we have seen/heard is that the fed tax rebate is calculated last - after all other reductions.

[Wy_White_Wolf]

From what I understand (again not a liscenced tax advisor):

Ask if you are going to receive a 1099 for the $8000 discount/credit? This maybe done when the credit/discount is coming from a 3rd party such PoCo or State/local government.

If yes, then the first method can be used after you claim it as income.

If no, then the second method has to be used.

WWW

[Volusiano]

From what I understand (again not a liscenced tax advisor):

Ask if you are going to receive a 1099 for the $8000 discount/credit? This maybe done when the credit/discount is coming from a 3rd party such PoCo or State/local government.

If yes, then the first method can be used after you claim it as income.

If no, then the second method has to be used.

WWW

I'm not the OP, but I'm just backing up what Wy_White_Wolf said here. My POCO paid my contractor directly a $500 utility rebate, so I never received a 1099 for it, of course. So I used the second method and only claimed the 30% on the final price that I paid my contractor which included a reduction adjustment for $500 in the price already.

This is different than the $500 discount the contractor gave me for signing up early that I mentioned in a previous post, which was also included as a reduction in the final price that I claimed 30% on.