Solar as a business expense?

[nomadh]

Been looking for a way to go solar for a while now. My tax person tells me the std 30% fed tax credit isn't going to help me much and will take years to recoup. And it seems the official word is still not in on if you can even do that past 2016. But my wife does run her business from our home and she is the main reason we run AC during the day. Does anyone have any information on buying solar and using it as a business expense to help offset employment tax and such. It just hit me that there must be some info on that and that this place has the most knowledge going. If that works is there any way to do that and get whatever portion of the 30% I can also or are the mutually exclusive?
Any thoughts?

[nomadh]

Heres a bit of info from a business site:

Here are some basics you should know when considering a solar system:

Basis reduction. You must reduce the basis of your home by the amount of any credit allowed, but you can add the cost of the system to the basis of your home. Using the example above, your net increase in basis would be $12,600 ($18,000-$5,400). Make sure you track this addition and all other capital improvements to your home because they will come in handy in reducing your taxable profit when selling your home.

If you must reroof your house or upgrade your electric service to accommodate a new solar system, you may add those costs to the basis of your home, but you cannot take the solar credit against those costs.

Any rebates you receive reduce the basis; do not declare them as taxable income. Rebates and other cash incentives must be subtracted from the cost before taking the 30% tax credit.

Loan Interest. If you finance the installation, you may deduct the interest if the loan is secured by your principal residence, e.g. home equity loan or other mortgage.

Home Office. If you deduct expenses for a home office, you may depreciate the proportionate cost of the solar system, electric service upgrades, and reroofing as part of your home office expense. The IRS allows 100% bonus depreciation for systems placed into service by Dec. 31, 2011 and 50% bonus depreciation is allowed for systems placed into service by Dec. 31, 2012.

For example, if your home office is equal to 20% of your total home area, you may depreciate 20% of the cost of the system. Multiply the cost of the solar system (less rebates and other cash incentives) by 20% and depreciate the result over 5 years.

How to take the credit. Complete Form 5695 and attach it to your Form 1040. Enter the credit on Form 1040, line 52. For more information on this credit, see the instructions for Form 5695.



Multiply the cost of the solar system (less rebates and other cash incentives) by 20% and depreciate the result over 5 years.
By "less rebates" I assume they mean the 30% fed credit also?

[JerryE]

Came across this thread when looking for some info on solar panels and my 2018 taxes, hoping to maybe get some guidance on how to approach things as I start my taxes.

First, a quick rundown of what I've done so far:
Installed a 6.7kW system at home and had it installed/commissioned prior to the end of 2018. System was financed under a home improvement loan in my name, and sold to my wife who runs a sole proprietorship out of our house. This allowed us to apply for a 25% Federal rebate in addition to the 30% Federal rebate normally received, as well as 12% rebate from Focus on Energy. Currently these are still pending and have not been received. The rebate submissions did include all material costs and fees associated with the solar installation.

The total amount applied for rebates was about $11,950 (system as sold, and all other incurred costs), so I'm anticipating a total rebate amount of just over $8000. Because I financed the project, including the load closing costs (roughly $1000), my net cost should be about $4950.

At this point, I'm trying to understand what I might gain by depreciating the costs under my wife's business by one of the various schedules, or if it's not worth the work to worry about as my payback period is only 3.5 years in the end. 2018 was the first year my wife was operating a business and I purchased TurboTax's home and small business product for our 2018 taxes, but I don't want to wholly rely on TurboTax to figure out the best way to handle this (plus I understand some tax stuff, but reading about depreciating assets and other more in depth things was making me go cross-eyed, so I don't want to rely on figuring it out by myself).

thanks in advance,
Jerry

[SunEagle]

IMO I would talk to a CPA and let the experts in the field of Fed Tax returns handle it. Asking for legal tax advice in an open forum could get your the wrong information.

[JerryE]

IMO I would talk to a CPA and let the experts in the field of Fed Tax returns handle it. Asking for legal tax advice in an open forum could get your the wrong information.

I was thinking I would, have a friend of my parents who is one, I was just hoping someone here might have worked through something similar and could at least offer what they did/found, without offering any specific tax advice on the matter.

[SunEagle]

I was thinking I would, have a friend of my parents who is one, I was just hoping someone here might have worked through something similar and could at least offer what they did/found, without offering any specific tax advice on the matter.

I understand the desire for free tax advice but you have to determine if you want to follow advice that may or may not be acceptable to the IRS.

With the amount you are talking about I would get advice from an expert in the field.

[foo1bar]

IMO I would talk to a CPA and let the experts in the field of Fed Tax returns handle it. Asking for legal tax advice in an open forum could get your the wrong information.

I agree with your reasoning - but I would look for someone who is an "enrolled agent" - and preferably someone already knowledgeable about solar tax credits for businesses and individuals.
A CPA may be a tax expert - in which case they're probably also an enrolled agent. Or they may have essentially zero tax experience/knowledge - there are a lot of jobs for CPAs that don't deal with taxes.
On the plus side, anything you pay the tax expert is probably money that can be considered a business expense.

[SunEagle]

I agree with your reasoning - but I would look for someone who is an "enrolled agent" - and preferably someone already knowledgeable about solar tax credits for businesses and individuals.
A CPA may be a tax expert - in which case they're probably also an enrolled agent. Or they may have essentially zero tax experience/knowledge - there are a lot of jobs for CPAs that don't deal with taxes.
On the plus side, anything you pay the tax expert is probably money that can be considered a business expense.

True. I am just trying to tell the OP that anything you or I say may not be the correct information when it comes to a tax question involving some one else.

[foo1bar]

True. I am just trying to tell the OP that anything you or I say may not be the correct information when it comes to a tax question involving some one else.

I would go further - that there are some people on this forum that have in the past made statements about tax law that are just plain wrong.

The OP should really get competent advice. If nothing else, having the EA do the taxes means that you're covered by their insurance - and the IRS won't be as aggressive towards you - if the EA gave you bad advice/screwed up.

[J.P.M.]

I was thinking I would, have a friend of my parents who is one, I was just hoping someone here might have worked through something similar and could at least offer what they did/found, without offering any specific tax advice on the matter.

Do as you wish, but the considered opinion here is to get advice from a qualified tax professional. Free advice here, in tax matters anyway, is worth about what you pay for it with respect to reliability and accuracy.

[organic farmer]

I am a farmer. We depreciated our solar system using straight-line method over 7 years.

1/7th of the total cost is deducted from taxable profits each year.

[Paul Land]

Been looking for a way to go solar for a while now. My tax person tells me the std 30% fed tax credit isn't going to help me much and will take years to recoup. And it seems the official word is still not in on if you can even do that past 2016. But my wife does run her business from our home and she is the main reason we run AC during the day. Does anyone have any information on buying solar and using it as a business expense to help offset employment tax and such. It just hit me that there must be some info on that and that this place has the most knowledge going. If that works is there any way to do that and get whatever portion of the 30% I can also or are the mutually exclusive?
Any thoughts?

I smell IRS Audit. I had home office deduction for 7 years PC Repair shop and got audited by tax man. Maybe a free standing off-grid office only with dedicated window unit AC, lights and outlets. Is office for AVON or staffed with workers are you DBA or LLC or C-Corp

[NCmountainsOffgrid]

here's something from an online source:

https://turbotax.intuit.com/tax-tips/small-business-taxes/the-home-office-deduction/L1RZyYxzv

"...Indirect Expenses:
These will probably be your most fruitful home office deductions. Because part of your home qualifies as business property, part of the costs of running it can be converted from non-deductible personal expenses to business write-offs. If your office space takes up 20% of the house, you can deduct 20% of your bills for utilities, homeowners insurance, homeowners association fees, security, and general repairs and maintenance... "

but, always confirm with your tax preparer for the correct answers for your specific situation.

[TheRealBobSacamono]

Been looking for a way to go solar for a while now. My tax person tells me the std 30% fed tax credit isn't going to help me much and will take years to recoup. And it seems the official word is still not in on if you can even do that past 2016. But my wife does run her business from our home and she is the main reason we run AC during the day. Does anyone have any information on buying solar and using it as a business expense to help offset employment tax and such. It just hit me that there must be some info on that and that this place has the most knowledge going. If that works is there any way to do that and get whatever portion of the 30% I can also or are the mutually exclusive?
Any thoughts?

Out of curiosity, where are you located?

[nomadh]

San diego area. We do already write off part of utilities, phones, insurance I think and such. Maybe part of 5he mort. I'd think parts of the solar PV after the 30% could also be reliable. My wife being home all day using energy is part of the reason we felt we had to get solar. There was no part of the day someone wasnt home using ac or other power.