Can you get a tax credit for expanding your existing solar system if you already got a credit on the original installation some years ago?

[NCperson]

@TomD8 - I am not an expert here, but to me adding 'additional' solar is not a relacement.  The additions are 'original'. 

Think of it as I do the install in phases.  I did half in 2021 (because that is all I could afford) and added additional solar panels in 2022 (because I could now afford it).  Both are original installations.  

[TomD8]

@NCperson 

I just wonder if the IRS will see an expansion of an existing system on the same home as an “original” installation.

What would stop a homeowner from installing a partial system today and an additional system a year later on the same home, then claiming both were “original” installations - and claiming two credits?  I don’t know the answer.

[NCperson]

@TomD8 - I don't know the answer either, but this is from Form 5695 instructions 

"Costs. For purposes of both credits, costs are treated as being paid when the original installation of the item is completed"

So if I install the solar in phases, each item is originally installed....  it doesn't say when the SYSTEM is installed; it is when THE ITEM is installed. 

further, the instructions state: 

Who Can Take the Credits
You may be able to take the credits if you made energy saving
improvements to your home located in the United States in
2021.

it never states installing 'a system'; it states making improvements...... so if I do it in phases, what is the issue? 

[TomD8]

@NCperson 

I’m just being the devil’s advocate here, but using your argument, what would stop a homeowner from breaking down his solar installation into 4 phases, and then claiming 4 credits?  

[NCperson]

@TomD8 - As long as all 4 installs are 'energy saving improvements' why would that not qualify? 

Who Can Take the Credits
You may be able to take the credits if you made energy saving improvements to your home located in the United States in
2021.

The credit is a percentage of what you spend in any event....if it was a hard dollar amount for each install (which could create a motivation for multiple installs), then I could see why that would be problematic.    

I don't see where in the instructions the number of installs is limited.  But the install has to be 'energy saving improvements'.  So I could see multiple installs being problematic if the 1st install doesn't yield energy savings, because you don't get to 'critical mass' until the 3rd install, both assuming each install creates 'energy savings improvements', why can't someone take the credit? 

https://www.irs.gov/pub/irs-pdf/i5695.pdf

thoughts? 

[TomD8]

@NCperson --

All I'm saying is that if I were an IRS auditor (which thank god I'm not), I think I would raise an eyebrow if a homeowner claimed multiple solar credits on the same house.  I think that's why the word "original" appears in the Form 5695 instructions.  But if somebody wants to try it, more power to them.

[NCperson]

@TomD8 I can see your point if the word 'system' was part of the qualification, but it is not.  It just says 'energy savings improvements'

on to the next topic!

[Hummel4876]

I see a string on this topic but it hasn't been updated for the 2023 version of ITC. I am considering an installation on my primary residence in 2023. For me, the payback period is extremely important. I am considering two options. One is a 10KWH/yr system and the other is a 15KWH per year system. Can I install a 10K system in 2023, and take the 30% tax credit and the expand it to 15K in 2025 and take the 30% credit on the 5K expansion?

[Opus 17]

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@Hummel4876 wrote:

I see a string on this topic but it hasn't been updated for the 2023 version of ITC. I am considering an installation on my primary residence in 2023. For me, the payback period is extremely important. I am considering two options. One is a 10KWH/yr system and the other is a 15KWH per year system. Can I install a 10K system in 2023, and take the 30% tax credit and the expand it to 15K in 2025 and take the 30% credit on the 5K expansion?

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The changes in the inflation reduction act are summarized at the link below.  Any language uncertainty regarding expanding an existing system that might have existed was not really modified.

https://ttlc.intuit.com/community/tax-law-changes/discussion/faq-revisions-to-section-25d-residentia...

The federal credit is for "solar energy expenditures."  It does not discriminate between a virgin installation, an upgrade, or even repairs.  I don't see why, based on the law as of today, that adding capacity in a future year would not qualify.  

[bratman]

Can you get a tax credit for expanding your existing solar system if you already got a credit on the original installation some years ago?

[bratman]

Can you get a tax credit for expanding my existing solar system if I already got a credit on the original installation in 2020, but am wanting to add 10 panels in 2023?

[Veerstraat]

I've read on two different online sources that add-on of solar panels to an existing system are not eligible for the tax credit. However, both sources are very soft in its positions. Note in the source with attached link, under "A Note on Incentives", it reads "Unfortunately, most homeowners will not be eligible for solar incentives when expanding their systems. For example, they probably cannot claim another federal tax credit. It is critical to be upfront with customers about this, so they understand the incentives before making a decision to expand their solar system. "  

https://www.greenlancer.com/post/how-to-add-solar-panels-to-existing-system

[Opus 17]

@Veerstraat 

The actual tax law section 25D, defines solar energy expenditures this way. 

The term “qualified solar electric property expenditure” means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer.

The tax code doesn’t say anything about limiting the credit to the first installation, or only allowing the credit in a single year. There is nothing in the law that would disallow the credit for somebody who is expanding their system or replacing an outdated and inefficient system with a new one.

[Veerstraat]

@Opus 17 Thank you for the tax code excerpt and your interpretation of it. I have seen so much conflicting information on add-ons to an existing system, however, noting that results from Google searches on tax code is not the best source of information! 

[bratman]

How can we answer line 18 and not be disqualified?