I have a solar energy loan. Can I include the interest on that loan?

[DS30]

Yes, you may able to claim the interest as an itemized deduction if you financed this home improvement.

A qualifying loan is one that is taken out to add "capital improvements" to your home, meaning the improvement must increase your home's value, adapt it to new uses, or extend its life. Examples of capital improvements are: adding a third bedroom, adding a garage, installing insulation, landscaping, solar panels and more.

Include this home improvement interest expense under the same section as you would Home Mortgage Interest.

To enter your Mortgage Interest in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Deductions and Credits”
3. Next click on "jump to full list" or “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Your Home”
5. Choose "show more", then Mortgage Interest, Refinancing and Insurance

It is OK to show your home improvement interest expense as mortgage interest under the 1098 section of Schedule A. Just keep a copy of your loan information with your tax records, so if you are contacted by the IRS, you will just need to provide an explanation of your situation (that your additional mortgage interest is related to a home improvement loan and provide the IRS with the details of this loan).

Additionally, if you are claiming a sales tax deduction in your home state, you can include the sales tax paid on building materials as a major purchase under this section.

A few things to remember about this major purchase deduction, you will only get this extra deduction if:

• The sales tax rate on this major purchase needs to be the less than or same rate as your state's general sales tax rate.
• You are taking the state's sales tax deduction as opposed to the state's income tax deduction.
• You itemize on your return.

To enter this transaction in TurboTax, log into your tax return (for TurboTax Online sign-in, click Here and click on "Take me to my return") type "Sales Tax Deduction" in the search bar then select "jump to Sales Tax Deduction". TurboTax will guide you in entering this information.

To enter your sales taxes and major purchases in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Deductions & Credits”
3. Next click on "jump to full list" or “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Estimates and Other Taxes Paid ”
5. Choose "show more", then Sales Tax (start/update/revisit)
6. Choose - continue to sales tax and choose "Easy Guide"
7. If your state sales tax information is already entered you will need to edit it to enter your major purchases information.
8. On the screen that says Major Purchase - select "yes"
9. Enter your building material information and sales tax here on the next screen.

[JAWED123US]

i HAVE RENTAL PROPERTY AND INSTALLED SOLAR  ON TOW DIRRFERENT PROPERTIES 

i dont see any where i can write two properties address ,l do i hav eto include both solar expenses together on one property , secondly there is no way i can show the finnacing of moratage on solar on my rental properties//

[DianeC958]

If you have two different rental properties, you need to set each property up individually in TurboTax.

To set them up go to

• Wages & Income
• Rental Properties & Royalties
• Rental Properties & Royalties (Sch E)

When you add the expenses for the rental properties there is an expense for mortgage interest.

If you have financed the solar panels separately from the mortgage there is also a place to record other interest you paid that is related to the rental property.

Real Estate Tax and Rental Property

@JAWED123US

[FS22]

TurboTax allows only a mortgage or HELOC to be added under the 'Mortgage Interest, Refinancing, and Insurance' and asks for information on 1098 form.  I do not receive 1098 form from the lender for solar energy loan. How can I deduct this expense as explained above?

[KrisD15]

No, it is not true that interest on a loan to purchase solar panels can be claim as a deduction as Home Mortgage Interest because it des not hold a lien on the house. 

You COULD refinance or take a HELOC (Home Equity Line Of Credit) against the house and use it to purchase solar panels, in which case the total interest of the loan WOULD be eligible.  But as a separate loan, no. 

If the property is a rental, you CAN claim the interest, but in this situation, the amount of interest paid would be entered as a rental expense, not in the 1098 section. 

[vhswonderland]

So, there is no way to deduct ANYTHING if I have installed solar panels which are financed by the installer? I break even with the solar system on my electric bill, but I cannot believe that going solar, we, poor people, like me who canNOT afford a lump sum to own the system right away, are not rewarded for saving environment.  

[JulieS]

Yes, you can claim the cost of a solar power system installed in your home. The fact that you took out a loan doesn't keep you from getting the credit for that. 

You claim the full cost of the panels and installation in the year they are installed.

Here is how to do that in TurboTax Online:

1. Open your return.
2. Select Deductions & Credits, then select Start or Edit to the right of Home Energy Credits. 
3. Answer the questions on the next few screens according to your situation.
4. Enter your costs in the box next to Solar Electric costs. If you have any questions about what to include, select Learn More on the screen for extra help. 
5. Continue through the remaining questions in the section. 
    

The interest that you pay on the loan is probably not deductible, unless it is secured by your home. That is what the earlier discussion is about. 

If you have more questions about the interest, please reply with more details about whether your loan is secured by your home.