Yes, you can depreciate the solar panels. However, you must subtract whatever tax credit you received from the cost basis. Since the panels are "a physical part of" the structure now, they get classsified as residential rental real estate and depreciated over 27.5 years.
If the panels are placed "in service" on the same date the property itself is, then it's easier/simpler just to add your allowed cost to the cost of the structure - *NOT* the cost of the land.For example, if on the structure you have:
COST: $100,000
COST OF LAND: $30,000
Then after subtracting your tax credit from the cost of the solar panels lets say you have $10,000 to depreciate. Change your above values to:
COST: $110,000
COST OF LAND: $30,000
Now, the program "Knows" that $70,000 gets depreciated over the next 27.5 years.
If you want to enter the panels as a separate asset, that's fine too. There's pros and cons to both ways. I myself would enter them as a separate asset. That's because in the event of something such as a hurricane, more than likely the solar panels will be damaged before the structure is damaged, and it makes it simpler to handle the asset with the insurance payout and all that stuff.
As a side note, when you convert a personal use property such as your primary residence, to rental property, take special note that your standard homeowner's insurance policy *WILL* *NOT* cover you. You need to either convert that existing policy to a rental dwelling policy, or purchase a completely separate rental dwelling policy. Whichever you you, insist that the solar panels be included in that policy. Remember, if it's not in writing, then it *DID* *NOT* *OCCUR*. So y our agent can talk the talk all day long. What they say doesn't mean squat. Insist it be in writing and endorsed by the policy underwriter.
