Question about solar tax credit

[NorCalX]

Originally posted by organic farmer https://www.solarpaneltalk.com/forum/solar-panels-for-home/solar-panels-for-your-home/299655-question-about-solar-tax-credit?p=299709#post299709"]View Post[/URL]
The tax credit was extended.



Funny, well it's not really funny, but several of the non stop Solar Company ads still running mention the tax credit expiring in 2016.

I realize it's costly to redo a TV commercial, but if it's factually incorrect then I certainly wouldn't give those people my money.

We get the job done with espirit de corps!

[Yaryman]

Funny, well it's not really funny, but several of the non stop Solar Company ads still running mention the tax credit expiring in 2016.

I realize it's costly to redo a TV commercial, but if it's factually incorrect then I certainly wouldn't give those people my money.

We get the job done with espirit de corps!

Bingo.

[hnguyen11033]

If you itemize your Income Tax filing [for example if you have a home mortgage then you likely use the mortgage as a write-off, If you pay for any form of health care then you likely use the medical expenses as a tax write-off.]

We used 100% of our solar system expenses as a tax write-off.

Plus there is the tax credit thing for 30% of the amount.

Oh wow! I did not know about that. I will definitely ask my tax guy about it. Since I am in the 25% tax bracket and if I were to write-off $10,000 for my system plus the 30% tax credit = A WHOOPING TOTAL OF 55%???? God, I hope you are right!

[organic farmer]

Oh wow! I did not know about that. I will definitely ask my tax guy about it. Since I am in the 25% tax bracket and if I were to write-off $10,000 for my system plus the 30% tax credit = A WHOOPING TOTAL OF 55%???? God, I hope you are right!

We spread out our purchase. We got the panels one year. The wiring and E-panel the next year. The battery-bank the third year. So each year we wrote-off how much we spent that year.

Then the year we finished [2015] we used the Tax Credit.

But we always write-off our mortgage, health insurance and other stuff.

I am a farmer, so nearly everything I spend money on is a tax write-off in some context.

[hnguyen11033]

Thanks. I will ask my CPA about it.

[compchat]

When you say write-off I expect you mean deduction ? Why would a solar installation qualify for a tax deduction unless it is written off as a buisness expense ? If you have a home office I guess you could write off a portion of the cost of the installation as a business expense. Other than that unless you are installing the system for use in your business I don't understand how you can "write-off" the installation as a tax deduction above and beyond the 30% tax credit.

[compchat]

How about the interest on the loan if you purchase the system?

Any CPAs out there ?

[NorCalX]

It depends how you "purchased" the system

I took a home equity loan. The interest on that is deductible.

Another option is a PACE type loan. The interest on that is also deductible

[organic farmer]

When you say write-off I expect you mean deduction ? Why would a solar installation qualify for a tax deduction unless it is written off as a buisness expense ? If you have a home office I guess you could write off a portion of the cost of the installation as a business expense. Other than that unless you are installing the system for use in your business I don't understand how you can "write-off" the installation as a tax deduction above and beyond the 30% tax credit.

Your right.

This house we have now, is the fifth home we have owned. The four previous homes were Multi-Family-Residences [Tri-plex, four-plex, five-plex buildings] Nearly every expense was a tax deduction. Now this home is a farm, so again nearly every expense is a tax deduction.

I have only owned homes that have been in some manner a business, that I forget how some people's homes are not. Sorry.

[tru2logan]

Your right.

This house we have now, is the fifth home we have owned. The four previous homes were Multi-Family-Residences [Tri-plex, four-plex, five-plex buildings] Nearly every expense was a tax deduction. Now this home is a farm, so again nearly every expense is a tax deduction.

I have only owned homes that have been in some manner a business, that I forget how some people's homes are not. Sorry.

Please be careful when talking tax credits/deductions unless you are sure about the subject matter. Many may just take your word for it and assume that their situation is the same as yours.

To clarify, anyone that owns their system can claim the 30% federal tax credit. This assumes the irs actually keeps tax from you and you have high enough income to have tax attributes.

If you are installing the solar for business purposes, that business may also depreciate (write off) 85% of the total cost of the system over a 5 year period. You can elect to take up-front "bonus depreciation" of 50% in year one and spread out the rest over the next four years. To make things even more complicated if the solar is for both business and personal use you must divide the cost of the system between the two based on "business use" percentage and then only depreciate the applicable dollar amount being used for business. For example:

John spend $20,000 on a new solar system for his 100% business use rental home. On that years' tax return John will get a tax credit of $6000 (30%). Plus John will also get to start the depreciation of his system. In year one he gets more because elects to use his 50% bonus depreciation. So he takes depreciation in the amount of $8,500 in year one ($20,000 x .85 x .50). In each of the next four years he will get the remaining depreciation write off of approximately of $2,125 ($20,000 x .85 x .50 / 4). Depreciation will save you in real dollar what ever tax bracket you happen to be in any give year. For most on this forum i would assume that to be a 25% Federal tax bracket but yours could be more or less depending upon your income.

In the same example above if the home was let's say a duplex and John lived in one unit and rented out the other unit. The tax credit remains the same however the depreciation write off would be only half the amounts mentioned above. You cannot depreciate or write off the cost of the system being used for personal use, only business use. Same concept for any other type of business being it rentals, farming, construction, etc.

Hope that helps, please forgive me if there are any math mistakes above.

[diogenes]

About 10 days ago or so. It was in all the papers.

did some googling and found it, thanks guys, wasn't aware this had happened

[veritass]

Hi all,

Can someone please help me clear my confusing on solar tax credit.
Total system cost of about $10,000 x 30% (credit) = $3,000 in tax credit

Each year, due to 3 kids and a mortgage. I get about $6000 in federal tax refund. Should I change my withholding (increase allowances) so that I owe the government money and use the $3k in credit or do nothing. Based on my reading, withholding has nothing to do with the tax credit and tax liability.

For example:

Let's say this year I made $100,000 with no deductions and my tax bracket is 30% = $30,000 in tax liability. If my employer withhold $40,000 (withhold) - $30,000 (liability)= $10,000 refund check. Since I have $3,000 in solar credits, my tax liability becomes $27,000? Which means $40,000 (withhold) - $27,000 (liability) = $13,000 refund check? Am I correct? If that is the case, then there is no point in changing the number of allowances and risk getting audit. I am pretty sure my tax liability even after all deductions are more than $3,000.

Thanks

Whether or not you get a tax refund doesn't matter. What matters is the amount of tax you owe the government for the year.

[veritass]

Keep in mind that whether you get the Tax Credit or not you may still be able to use the full expense as a tax write-off.

We did not finance any of our Solar-Power system. We bought as much as we could afford each year. It took us three years to finally get all of it in-place. Each year's expenses we used as write-offs.

Tax Credits are a different topic from tax write-offs.

The year that you finish your system, you may use the 30% Tax Credit [if you qualify], and you may also use the 100% write-off.

I don't think personal home solar systems are tax deductable. Also, I doubt you can deduct as a business expense. I would guess you would have to depreciate it.

[FFE]

All you must do is make certain that you pay as much tax as you did the previous year to prevent penalities and interest.

For instance I'm not going to pay the 4th estimated payment because my tax credit from the solar installation should more than cover it. If you're not certain ask your accountant.

Make sure you follow the first part. Otherwise you will use your Solar Tax Credit to pay penalties and interest.

[hnguyen11033]

Since this is my primary resident. I don't think I can write it off, but it wouldn't hurt to ask my CPA when tax comes. Thanks guys for all the help!