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New Member
posted Jun 6, 2019 5:17:32 AM

I installed solar panels in 2015, but paid off the loan in 2016. Can I deduct the interest expense on the loan

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3 Replies
New Member
Jun 6, 2019 5:17:33 AM

In general, consumer loan interest (personal loan) is not tax deductible

Did you get a home equity loan to pay for the solar panels? If so, yes. The interest is deductible. 

  • Only if the loan is secured by your home (such as home equity or other mortgage) the interest would be deductible as a home mortgage interest. 
  • Some lenders, when offering a mortgage loan, include a range of home improvements in the loan, such as solar panel systems.  Since the mortage is secured debt (by your home) the interest would be tax deductible.


Per Tax Topics - Topic 505 Interest Expense - IRS.gov

Types of interest deductible as itemized deductions on Form 1040, Schedule A (PDF), Itemized Deductions, include:

  • Investment interest (limited to your net investment income) and
  • Qualified mortgage interest including points (if you're the buyer); see below.

Types of interest not deductible include personal interest, such as:

  • Interest paid on a loan to purchase a car for personal use.
  • Credit card and installment interest incurred for personal expenses.
  • Points (if you're a seller), service charges, credit investigation fees, and interest relating to tax-exempt income, such as interest to purchase or carry tax-exempt securities.

Returning Member
May 5, 2020 5:35:54 PM

My question is in regard to purchasing solar panels on a farm owned by my electric service. My home electric bill will be reduced by credits generated by the solar panels.  The contract can be transferred to a subsequent buyer.  The interest would be charged from  a home equity loan.  The purchase would be with funds from the home equity loan.

Employee Tax Expert
May 6, 2020 10:08:06 AM

Beginning in 2018, interest on a home equity loan or line of credit is only deductible if the loan was used to "buy, build or substantially improve" the home that secures the loan. You cannot deduct interest on a loan used for other purposes, such as the installation of solar panels. 

 

Home Equity Interest