Federal Tax Credits for Upgrades

[Solar Guppy]

This also makes it clear that you can take the credit any year you add new equipment.
The credit is available for qualifying expenditures incurred for installing new clean energy property in an existing home or for a newly constructed home. This credit has no annual or lifetime dollar limit except for fuel cell property. Taxpayers can claim this credit each tax year they install eligible property until the credit begins to phase out in 2033.

That is most helpful, interesting that the IRS has not updated the language of the form instructions

 

[DIYrich]

Can you get a tax credit for expanding your existing solar system if you already got a credit on the original installation some years ago?

Can you get a tax credit for expanding your existing solar system if you already got a credit on the original installation some years ago?

ttlc.intuit.com

 

[DIYrich]

This also makes it clear that you can take the credit any year you add new equipment.
The credit is available for qualifying expenditures incurred for installing new clean energy property in an existing home or for a newly constructed home. This credit has no annual or lifetime dollar limit except for fuel cell property. Taxpayers can claim this credit each tax year they install eligible property until the credit begins to phase out in 2033.

I'm just playing Devil's Advocate (the following is not my position):

"Taxpayer can claim this credit each tax year that the install ELIGIBLE PROPERTY ..."
"Eligible Property" is "Qualified expenses include the costs of NEW, clean energy equipment including Solar Electric Panels"
So it begs the question whether "addition to an existing solar system" (vs "addition to house") qualify as "new".
Also, that is a press release, and not Code, Regulation, or Private Letter Ruling. It is "supportive", but a weak support.

Actual "instructions" (which can be relied upon), state:
Qualified solar electric property costs. Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. Some solar roofing tiles and solar roofing shingles serve the function of both traditional roofing and solar electric collectors, and thus serve functions of both solar electric generation and structural support. These solar roofing tiles and solar roofing shingles can qualify for the credit. This is in contrast to structural components such as a roof's decking or rafters that serve only a roofing or structural function and thus do not qualify for the credit. The home doesn't have to be your main home.

Instructions for Form 5695 (2023) | Internal Revenue Service

www.irs.gov

The definition does not distinguish between the initial installation of a system vs upgrades to the system. One can argue that a full replacement (replace 25 year old equipment during a roof replacement) would qualify.

 

[Gavin Stone]

Also I think the people that said they “feel” or “see” it a certain way were using that particular verbiage because it’s obvious the code takes some interpretation. The CPA’s and tax people I’ve talked with obviously “see” it the way I mentioned before. ??‍

 

[Solar Guppy]

I'm just playing Devil's Advocate (the following is not my position):

Also, that is a press release, and not Code, Regulation, or Private Letter Ruling. It is "supportive", but a weak support.

This certainly muddles the water. Guessing there is very involved process for the IRS to change instruction languages vs a press release. At a minimum it should prevent prosecution ( or penalties ) as it would be reasonable to follow something provided by the IRS, but I am still conflicted as to the legality and new admiratiors may push for other "press releases" to be removed.

I've been planning for a large storage capacity increase this year until I read the posts before I joined the conversations in this thread and can see why there is uncertainty. With all the internet sources pretty much all saying the same thing ( not allowed ) it spooks me but the link to the IRS press release shows something to fall back on. ( I would screen capture the press release )

 

[42OhmsPA]

I think Q3 clears it up... https://www.irs.gov/credits-deducti...ean-energy-property-credits-timing-of-credits

I'll be claiming my new inverter, batteries, array costs, wiring, conduit etc. again this year as I did last year. I won't be claiming the additional panels I bought this year since they were a fb marketplace deal, everything else was bought this year (have receipts in case of audit) and will be claimed.

Could I claim my new welding mask I bought to assemble my battery rack ? (I won't)

 

[Ryushin]

Thank you for the back and forth debate. I think it's safe to assume, that as long as it's "new", it can be added in following years. I won't have to convince the CFO (wife) that we need to buy five more SOK batteries this year and we can push it to next year when we actually see the Federal Tax Credit.

 

[fpgt72]

I would say don't assume, that could bite you hard.

Sometimes it is smart to have a "professional" do your taxes. Goes double true if you are going out into the weeds. Also find one that will represent you if you have an audit. NO ONE wants an armed alphabet agency guy knocking on your door.

 

[DIYrich]

IMHO, getting tax pointers from a non-tax forum is fine (a solar credit of 30% is available). Going beyond that (what are the requirements, who is eligible, who can benefit, etc) is asking for trouble. If you want the details, you need to be on a tax forum, and understand how to interpret the information. A lot of basic tax prep understanding is assumed. If you are asking here, you probably do not have the "basics" that is assumed on a tax forum.

 

[Ryushin]

Also reading that TurboTax thread along with the links in that thread from post 27 goes into it fuller. I also prefaced it by saying it's "safe to assume". Based on all the information going back and forth.

Summary quote from that TurboTax thread:
"There is nothing in the law that limits the solar credit to a "first" installation. The law simply says

"The term “qualified solar electric property expenditure” means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer."

You can't get a credit twice for installing the same property (solar equipment). You can't claim the same equipment twice, and you can only claim in when it is placed in service (installed, inspected and turned on, regardless of when it was contracted or paid for). But there is nothing in the law that says you can only claim the credit once per house or once in your lifetime. "

 

[DIYrich]

Also reading that TurboTax thread along with the links in that thread from post 27 goes into it fuller. I also prefaced it by saying it's "safe to assume". Based on all the information going back and forth.

Summary quote from that TurboTax thread:
"There is nothing in the law that limits the solar credit to a "first" installation. The law simply says

"The term “qualified solar electric property expenditure” means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer."

You can't get a credit twice for installing the same property (solar equipment). You can't claim the same equipment twice, and you can only claim in when it is placed in service (installed, inspected and turned on, regardless of when it was contracted or paid for). But there is nothing in the law that says you can only claim the credit once per house or once in your lifetime. "

"Original installation".

BTW: you can't cite a TurboTax forum when the irs agent asks for what authority you used to determine you qualified for the tax credit.

If you are going to cite the law (code or regulations), you will need to cite it in its entirety, including where the defined term is used. Under what provision can "qualified solar electric property expenditure " qualify for which credit. Residential? ITC?

 

[ghostwriter66]

I trust my tax accountant more than some person on the internet with strong opinions.

Thats Crazy !!! Next you will be saying that getting MEDICAL advice from Google is also wrong ... !!!

 

[schiesserm]

From the IRS 5695 form instructions:

You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, biomass fuel property, and fuel cell property. Include any labor costs properly allocable to the onsite preparation, assembly, or original installation of the residential energy efficient property and for piping or wiring to interconnect such property to the home. The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.

There is also this paragraph:

If the total of any nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you generally can't take the energy efficient home improvement credit in 2022.

Which supports the one time nature of the qualification.

I was considering adding battery capacity, but its does appear the language would disqualify any additions to an otherwise qualified property.

Big picture is they want new installations, and the updated credit language is written to enforce this.

FRom energy.gov "there is neither a dollar limit nor is there a lifetime limit on the tax credit. The credit is only limited to 30% of qualified expenditures made for property placed in service in a given year."

 

[DaBeaver]

I bought 15kW of pv panels last year(2023), I plan to buy inverters/batteries this year and do the install, the panels being purchased in a year other-than the year they were installed should NOT be an issue for claiming the tax credit correct?

 

[B-Mod]

You can't claim a tax credit until the system is live. So don't claim the panels purchased in 2023, until your system is live.

 

[Solar Guppy]

I bought 15kW of pv panels last year(2023), I plan to buy inverters/batteries this year and do the install, the panels being purchased in a year other-than the year they were installed should NOT be an issue for claiming the tax credit correct?

If I understand your post, yes you can claim the credit for 2024 taxes with the installation completed, when equipment is purchased is not the metric the IRS is concerned with.