Residential Energy Efficient Property Tax Credits: Solar

This year is different, because this was the year you installed solar on your RV (or qualifying property), and now you’re ready to get that big fat tax credit to take 30% right off the top of that expense. I’m here to hopefully clarify this process.

If you’re reading this and haven’t yet installed solar on your RV, you only have a couple more years to get this sweet tax credit. 30% off the cost of a system is nothing to scoff at people, but the tax credit decreases to 26% for tax year 2020; drops to 22% for tax year 2021 then expires December 31, 2021… so what are you waiting for?

Yes. Your RV or motorhome qualifies for this residential energy tax credit!

Now then, let’s get down to it.

What you need to claim the tax credit

What’s qualified residential energy property?

Taken directly from the IRS: “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.

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. The home does not have to be your main home.”

All that is a fancy way of saying pretty much any cost related to installation and materials counts. Claim it. This includes a battery, inverter, wiring, and labor to install!

Form 5695 – Taking the credit

The thing about the solar tax credit is it isn’t “fully refundable,” meaning you can only take a credit for what you owe in taxes. This is different than other, fully refundable tax credits like the Child Tax Credit and Earned Income Tax Credit.

Luckily, you can carry over the unused credit to the next tax year. If you can’t claim the whole credit on your 2016 taxes, you get to reduce your 2017 tax bill, too. A tax liability calculation worksheet is provided in the instructions for Form 5695. Here’s what it looks like (keep in mind, this is a draft copy of the instructions).

This allows you to add up all your tax credits to see how much you qualify to take on the residential energy tax credit.

Line 53 on your Form 1040

Below is an example of how your credit amount will show up on your 1040. If your solar energy system cost you $16000, your taxes are reduced by a credit of $4,800. However, if you only have a tax obligation of $4,600, that’s all the credit you can claim for that tax year. You can carry the other $200 credit over to the next tax year.

Should I claim the tax credit if I partially paid (e.g., a deposit) in 2016 for an installation that won’t be completed until 2017?

No, the instructions for Form 5695 say “Costs are treated as being paid when the original installation of the item is completed,” so you can claim all the costs for your installation no matter when they were paid, but you have to wait to claim them in the year the installation takes place. Keep all your receipts and documents related to the install!

If I installed a solar panel system a few years ago and now I want to add new panels, can I claim the credit?

Yes! You can claim the credit for any new costs associated with the addition. You can’t go back and claim the credit for the previously-installed equipment. Hopefully you already claimed the credit for those costs back then.

If I install solar and claim the tax credit, will I have to repay the credit to the government if I sell the house within a certain number of years?

No! If you install a solar panel system on a home you own, you can claim the whole credit and sell at any point after. Keep in mind this is only true for homeowners. The law is significantly more complex for commercial solar installations.

Have a question related to solar installation and the residential energy tax credit? Feel free to be in touch!

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3 thoughts on “Residential Energy Efficient Property Tax Credits: Solar”

  1. Pingback: 7 ways to save money on your taxes - Tax Queen -

  2. Pingback: Top 10 tax questions for full-time RVers and their answers

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