Federal Tax Credit and State Sales Tax questions

[SonicXtasy]

Hi Guys, new to the forum and not sure if this was the right place to post this, please move it if necessary. I am interested in installing solar to try to lower my electric bill and have battery backup in case the grid goes down (temporary or grid attack). I want to purchase solar soon just to have it in my possession (incase of future supply chain issues or grid goes down I can do a temp setup) while I wait for the My Safe Florida Home grant program to see if I qualify for a grant to replace my roof. My questions/concerns are:

If I buy a solar system this year but don't get it "legally" installed until next year do I take the tax credit this year or next year?

Can out of state diy solar suppliers eliminate the sales tax for my Florida purchase. Looking at Signature Solar if that matters.

If I opt to just get solar panels this year (due to budget) and next year add batteries am I able to take the tax credit again for the batteries?

Any help, info or insight would greatly appreciated.

 

[drps10]

So I’ve been reading into this. You claim the credit the year it was “turned on”. If you want to do it in chunks. There is a the same credit of 30% for ESS (energy storage systems). So buy 1 inverter and the batteries one year and then the next year buy the other inverter (if doing split phase or need 2) and buy the panels for the solar credit.

If you are doing self install, then they won’t know when it was “turned on”, so if you install this year and turn them on next year, that could work or back fire too. If you want to wait to turn on, have a receipt from electrician off “looking over” install and verify turning on the system in the year you need.

I did a mini split install with receipts all showing end of 2022, but one part was back ordered and didn’t show up till Jan 3 2023. Installed it and had a tech come over later that month to verify it was on. So my install wasn’t turned on till 2023. That benefits me hugely for the $2000 federal credit I get vs $500 in 2022. But I have documentation to show all this.

 

[SonicXtasy]

So I’ve been reading into this. You claim the credit the year it was “turned on”. If you want to do it in chunks. There is a the same credit of 30% for ESS (energy storage systems). So buy 1 inverter and the batteries one year and then the next year buy the other inverter (if doing split phase or need 2) and buy the panels for the solar credit.

If you are doing self install, then they won’t know when it was “turned on”, so if you install this year and turn them on next year, that could work or back fire too. If you want to wait to turn on, have a receipt from electrician off “looking over” install and verify turning on the system in the year you need.

I did a mini split install with receipts all showing end of 2022, but one part was back ordered and didn’t show up till Jan 3 2023. Installed it and had a tech come over later that month to verify it was on. So my install wasn’t turned on till 2023. That benefits me hugely for the $2000 federal credit I get vs $500 in 2022. But I have documentation to show all this.

So what you are saying is even though I spent the money in 2023 but did not "finish" it until 2024 I can claim all of it on my 2024 taxes?

 

[drps10]

So what you are saying is even though I spent the money in 2023 but did not "finish" it until 2024 I can claim all of it on my 2024 taxes?

I’m not a tax guy by any means, but the verbiage says ..
“The installation of the system must be complete during the tax year.”

So if you don’t happen to finish the install because you are waiting on a part and can’t make it operational until that part gets install.

But if they do an audit and see you have pulled kw from PV from your system prior to the day you say, then you have some explaining to do. But I don’t know how audits works (if they can or would come look at your system).

My mini split install was waiting on the main outdoor condenser and couldn’t operate till then, so I have paperwork to back my argument.

 

[solson223]

I'm interested in this also. I'm in the preliminary phase right now and planning out my system. But soon I will be applying for permits and buying items for the overall build. I may buy some this year in 2023 and I'll definitely be buying stuff in early 2024, but the system likely won't be final inspected and turned on until some time next year. I'm in no major rush and will certainly take my time. I just want to make sure that the items I purchased this year and next can tally up towards the final deductions.

Also, does anyone know if a "solar ready" service panel is eligible for the tax credit? I'm already permitted to upgrade my panel and I figured I would buy a solar ready one if I can add that to the list.

Thanks.

 

[drps10]

From what I came across. You can’t include the electrical panel with solar credit! You can include the wiring and labor associated with the solar install. If that quote of wiring panels and wiring into panel which needs reworked for solar install happens to be wrapped into the entire labor cost for solar then how do you know?

But as far as a new panel wether solar ready or not, can’t do it.

There is a federal credit for a new electrical panel regardless of type as long as it is 200amp or larger. 30% up to $600 max limit you can claim.

I plan to do it in stages since you can do ESS and Solar separately. I’ll spend 10k on inverter and batteries first go, then solar panels and equipment following year to use the 3k. I’m fortunate enough to get the money back when I do it even though it says you don’t, so when I get a check it will offset the next purchase.

 

[DIYrich]

From what I came across. You can’t include the electrical panel with solar credit! You can include the wiring and labor associated with the solar install. If that quote of wiring panels and wiring into panel which needs reworked for solar install happens to be wrapped into the entire labor cost for solar then how do you know?

IMHO, electric panel upgrade is included in "Balance-of system equipement, including wiring ...". Anything you NEED to make the system legally work.

https://www.energy.gov/sites/default/files/2023-03/Homeowners_Guide_to_the_Federal_Tax_Credit_for_Solar_PV.pdf

Also:
…I bought solar panels but have
not installed them yet?
No. The tax credit is only for systems for
which installation was complete during
the year.

 

[Jim in Florida]

Hi Guys, new to the forum and not sure if this was the right place to post this, please move it if necessary. I am interested in installing solar to try to lower my electric bill and have battery backup in case the grid goes down (temporary or grid attack). I want to purchase solar soon just to have it in my possession (incase of future supply chain issues or grid goes down I can do a temp setup) while I wait for the My Safe Florida Home grant program to see if I qualify for a grant to replace my roof. My questions/concerns are:

If I buy a solar system this year but don't get it "legally" installed until next year do I take the tax credit this year or next year?

Can out of state diy solar suppliers eliminate the sales tax for my Florida purchase. Looking at Signature Solar if that matters.

If I opt to just get solar panels this year (due to budget) and next year add batteries am I able to take the tax credit again for the batteries?

Any help, info or insight would greatly appreciated.

Part or your answer. I am from Florida also and when purchasing from Signature Solar the recognized the address and did not add state sales tax.

 

[OffGridInTheCity]

At the federal level, I started claiming the 1st year the system was operational. Then as I expanded each year on the continuously operational system, I continued to claim new deductions for the new stuff each year - e.g. more panels, more battery, more charge controllers, more BMS, more wire, etc. The tax credit maxes out at $3000? or $3500? in a single year but the excess carries over to future years till you get it all. I'm at year 6 and my system is mature - so I'm winding down on new purchases. Pretty much in maintenance mode going forward.

Unfortunately, my state doesn't have any DIY off-grid tax breaks at this point.

 

[DIYrich]

At the federal level, I started claiming the 1st year the system was operational. Then as I expanded each year on the continuously operational system, I continued to claim new deductions for the new stuff each year - e.g. more panels, more battery, more charge controllers, more BMS, more wire, etc. The tax credit maxes out at $3000? or $3500? in a single year but the excess carries over to future years till you get it all. I'm at year 6 and my system is mature - so I'm winding down on new purchases. Pretty much in maintenance mode going forward.

Unfortunately, my state doesn't have any DIY off-grid tax breaks at this point.

Limit is $1,200 per year for "Energy Efficient Home Improvement Credit" ($2,000 for heat pumps, biomass).
Solar is "Residential Clean Energy Credit" and not limited.

Both are limited to your tax liability. "Residential Clean Energy Credit" can be carried forward. The "Energy Efficient Home Improvement Credit" cannot.

 

[thewilliam]

Federal: FWIW I took it literally - the year it is installed, not commissioned or turned on or PTO. Those all happen to be the same for me so maybe I didn't try to disect it as much as I sometimes do. I am including the cost of stuff purchased in prior years.

 

[solson223]

IMHO, electric panel upgrade is included in "Balance-of system equipement, including wiring ...". Anything you NEED to make the system legally work.

https://www.energy.gov/sites/default/files/2023-03/Homeowners_Guide_to_the_Federal_Tax_Credit_for_Solar_PV.pdf

Also:
…I bought solar panels but have
not installed them yet?
No. The tax credit is only for systems for
which installation was complete during
the year.

I've been reading conflicting info on tax credits. Most of the places that I've actually found info, it says that you can go back up to one year prior and have it roll over up to 5+ years forward if you haven't used it all. Granted that's after the system is complete, signed off, and turned on.

 

[drps10]

IMHO, electric panel upgrade is included in "Balance-of system equipement, including wiring ...". Anything you NEED to make the system legally work.

i stand corrected! I tried to find information to that you are wrong and I couldn't find any. So it looks like you can upgrade the panel with the tax credit for solar. I think what I was reading was the energy efficient tax credit (which I am getting with my heat pump)

 

[400bird]

If doing a DIY install, you can also claim tools needed for the install, not just main panel upgrades.

 

[DIYrich]

I've been reading conflicting info on tax credits. Most of the places that I've actually found info, it says that you can go back up to one year prior and have it roll over up to 5+ years forward if you haven't used it all. Granted that's after the system is complete, signed off, and turned on.

Make sure you understand when they talk about individuals vs business.

 

[DIYrich]

Federal: FWIW I took it literally - the year it is installed, not commissioned or turned on or PTO. Those all happen to be the same for me so maybe I didn't try to disect it as much as I sometimes do. I am including the cost of stuff purchased in prior years.

"Placed in service " is the usual standard. Permitted, tested, accepted, pto. Although pto may not be required if allowed to self consume before pto.

 

[Brett V]

At the federal level, I started claiming the 1st year the system was operational. Then as I expanded each year on the continuously operational system, I continued to claim new deductions for the new stuff each year - e.g. more panels, more battery, more charge controllers, more BMS, more wire, etc. The tax credit maxes out at $3000? or $3500? in a single year but the excess carries over to future years till you get it all. I'm at year 6 and my system is mature - so I'm winding down on new purchases. Pretty much in maintenance mode going forward.

Unfortunately, my state doesn't have any DIY off-grid tax breaks at this point.

This has been my procedure as well.

 

[Brett V]

I’d like to add that asking for tax advice on a solar forum is sketchy. You really should be getting tax advice from a tax professional. your friendly IRS auditor won’t be impressed when your defense is “I was told on an Internet forum this was legal”.

 

[solson223]

In almost every article I've read, government or otherwise, one thing is always consistent: You apply for the federal tax credit for the year in which your installation was complete. I think everyone is in agreeance on that. I know a lot of people have their opinion on the next part, which whether you can claim equipment purchased in a previous year. I haven't read anything from an IRS or other government site that says anything other than the snippet below. It never says the system has to be built with items purchased in that same year. I mean, how do you know the solar company you used to install it for you didn't use an inverter it had in the warehouse purchased 2 years ago. I don't think anyone is going to get dinged for a previous year purchase as long as you file in the year the system was implemented (complete, signed off, turned on) and you claim the correct value of the items, services that went into the install. If there's something that contradicts this, or provides more details, please share it because I certainly want to know.

• The solar PV system is new or being used for the first time. The credit can only be claimed on the “original installation” of the solar equipment.

Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics

This guide provides an overview of the federal investment tax credit for those interested in residential solar photovoltaics, or PV.

www.energy.gov

 

[Zwy]

Limit is $1,200 per year for "Energy Efficient Home Improvement Credit" ($2,000 for heat pumps, biomass).
Solar is "Residential Clean Energy Credit" and not limited.

Both are limited to your tax liability. "Residential Clean Energy Credit" can be carried forward. The "Energy Efficient Home Improvement Credit" cannot.

Correct, this is why I only installed one heat pump mini split this year and another will go in next year. I carried over some of the Clean Energy Credit and probably won't need more Energy Efficiency Credit for my tax liability.