Solar Tax Credit Advice?

7 years ago

We're planning on building an addition on our house this winter/spring, and will re-roof both the existing and new structures at the same time. I know next year is the last year for the full 30% national solar tax credit. I still need to get estimates and all that, but here's my two big questions:

People seem on the fence about whether you can include the cost of the roof in the 30%, but most signs (e.g., the solarize-your-neighborhood community rep I spoke to, Turbotax FAQs, solar company info) seem to be giving a tentative "all signs point to yes." Has anyone done this, and either had problems or not had problems with including the roof costs in the credit?
Someone mentioned that because it's a tax CREDIT, I won't be able to claim it fully unless I *owe* taxes for the year. For this year, we've used the tax calculator to try to make our withholdings as exact as possible. If I do go ahead, would I try to "short" my withholdings for next year by the amount of the credit? Am I right in thinking that if I owe $0 in taxes I would not get the credit and would have to see what I could rollover to the next year?

Any other tips from someone who has done this? I saw that you have to be sure you OWN the system and are not leasing it from the solar company to claim the credit. Any other advice would be appreciated.

Featured Answer

Jamie

7 years ago

last modified: 7 years ago

I have not taken advantage of the solar credit, however, I did get a credit for purchasing an electric vehicle a few years ago. You get the credit based on the tax you should have paid and not the amount you owe above what you have already paid in. With the EV credit, the maximum was $7,500. If the total amount you should have paid in taxes was greater than or equal to $7,500 then you got the full credit. In my case, I was pretty much balanced, like you are, with what I paid in. So, when I filed my income taxes that year, I took advantage of the tax credit. I got a refund for almost $7,500 (I think I might have owed $200 or so).

The credits reduce your tax liability. In your case, you may get the full amount (or close to it) of the credit back as a "tax refund". Also, your tax liability has to be greater than the credit in order for you to get the full amount. If it's less, then the amount of the credit is equal to your tax amount.

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Comments (7)

Addition Planner
Original Author
7 years ago
last modified: 7 years ago
@Jaime Outlaw -- Thanks, that makes a lot more sense! That was my understanding of a tax credit, but I got confused by what the solar community rep said about not receiving the full credit if you don't "owe" taxes. But, she is retired, so her total tax LIABILITY might have been too low to take advantage of the full credit.
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Suzanne
7 years ago
I was able to include a new roof in my 30% credit at my previous house. Also you must own the system to use the tax credit.
Addition Planner thanked Suzanne
rwiegand
7 years ago
What the tax credits give the AMT taketh away. We got no credit for our system, but it is still going to hit break-even in about 6 years from installation
bry911
7 years ago
What the tax credits give the AMT taketh away. We got no credit for our system, but it is still going to hit break-even in about 6 years from installation

The solar tax credit is available for AMT filers. There is no reason that you shouldn't have gotten the credit.

I got confused by what the solar community rep said about not receiving the full credit if you don't "owe" taxes.

The money that you pay or get refunded at tax time is not indicative of whether or not you owed taxes. Essentially, you have tax liability (owed taxes) less credits and payments = amount due to (you)/IRS. You must have total tax liability in excess of the amount of the credit to take it, it is not a refundable credit. So if your total tax liability is $5,000 the credit will be limited to $5,000.
PRO
Jeffrey R. Grenz, General Contractor
7 years ago
Be careful not to make your decision based on payments & credits... pay close attention to pricing as it varies significantly.
onobed
7 years ago
Hi

The law is you can only claim the ITC for solar and any improvements to the roof needed for solar.

It’s unlikely that you need to replace the whole roof to go solar. However, people do it all the time. If they were audited my guess is that would result in an updated return (not the worst thing, but you pay more tax and interest on that tax).

That said, it is more reasonable that the roof plane where the solar goes could be argued to be included in the ITC basis.

But you are correct in that getting solar done at the time you do your roof is more economical and offers more tax advantages.

Also- since solar is more complicated than just putting a roof up- make sure your contractor appropriately reflects this in his bill to you so you can capture the ITC in the solar part.

Finally, if you are not using the same company for both the solar and roof your are begging for trouble. I have a vested interest in that’s what I do, but I have been on the other side and the number of leaks that result from solar companies putting holes in roofs after the roof was installed is remarkable.