@dcortez wrote:
We own a rental property as "Real Estate Professionals" as we spend the required time on our real estate business. So we can deduct depreciations losses currently against other income, i.e. interest, div, gains, SS income, etc.
So if we put solar panels on our rental property roof, it would pay to depreciate over 5 yrs.
One problem. the depreciation is recaptured when we sell the property. So this defers taxes, not eliminates them.
Anybody disagree?
The idea with depreciation recapture is that it is better to save money now and pay it back later when it is worth less due to inflation. Plus, having the money in the mean time is valuable on its own, because you can invest it or use it for other interesting things. In other words, if you can claim a $5000 tax deduction now, then even if you have to repay the $5000 in the future, having the $5000 in your pocket in the mean time can allow you to invest or use it in other ways, and $5000 will be worth less in the future due to inflation.
That being said, I think the idea of depreciating solar panels over 5 or 7 years, instead of 27.5 years, is absurd. You would have to report yourself as being in the business of making and selling energy, so that you could claim a business depreciation rather than a rental depreciation, and I suspect that would not survive audit. I certainly wouldn't want to do that myself unless I had hired an accountant who endorsed it and who agreed to represent me and defend me at any audit.
