Could I claim the 30% federal solar tax credit for portion or all cost related to a re-roof if I get new solar panels?

[BillM223]

First, thank you for asking tax advice from a CPA instead of from a solar panel company.

You asked:

1)  Since the restructure of the entire roof was required, can I add the cost to the solar credit?

2)  If so, can I use the entire amount?  Of course, I could not have rebuilt only 66% of the roof since the entire roof bears the weight.

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1. If the engineering report specified that the entire roof be restructured in order to carry the weight, then this is a good argument that the structural part of the roof redo be includible in the credit calculation. Remember, at some point, the IRS has to depend on qualified engineers to determine what is and is not necessary to put solar panels on your roof.
2. As for the “entire amount”, I am not sure what “entire” refers to. If the entire framework supporting the roof had to be replaced because the entire roof is carrying the load, then this is a good argument for including the whole framework. However, I do not know to what extent the new roof will be includible in the credit. I would think that you would have to balance of putting the same material back on the roof after the reinforced framework versus the new metal roof. That is, the IRS might argue that if the new metal roof is much more expensive than a Homasote roof, then the whole cost should not be allowed, but only the difference between restoring the old roof covering and the new roof covering. It is much easier to argue that once you redid the framework that recovering the roof was a necessary part of the project since the roof wouldn’t be much of a roof if there was no roof cover (like shingles or tar paper or metal) so that should be included, but making the argument that you are going to install a more expensive roof cover than what was there would be a harder argument to support for me.

In short, the answer (to me) is that you are able to include in the credit calculate only the minimum coast necessary to carry and use the solar panels on the roof: which means the solar panels themselves, the wiring need to hook it up to the house, the structural improvements to support the new panels, and the minimum roof cover needed to recover the roof exposed by the rebuilding of the structural improvements to the framework (i.e., restore the function of the roof). Of course, I am not positive that I fully understand what your contractor intends to do to the roof, but I hope my thoughts serves as a guide to asking and answering your own questions. What it boils down to is what can you support if you are ever audited. Engineering study – good, expensive new roof cover (if it is more expensive) – bad.

[mwmcgehee767200]

@BillM223 , Thank you for the reply.

The difference in reroofing with the old, built up roofing over the Homasote and the restructured roof is not insignificant...about $30,000.  This included building new cross beams, adding the insulation material, plywood sheeting, layers of tar paper, fascia replacement (due to the increased cross section), fabricating and attaching the panels.  Basically, a new roof had to be built on top of the existing structure to reinforce it and properly distribute the weight.  

Since I have estimates for both, I'll deduct the cost of a straight replacement roof from the cost of the structural enhancements and use the difference as part of the credit.

By "entire amount" I was referring to the entire cost of the reroof project vs. a percentage of the cost of the project (the percentage of the roof that directly supports the solar panels).

If I were to use that approach, that would mean either 100% of the reroof costs or approximately 66% of the cost since that is the portion of the roof that is directly supporting the panels.  I would have to directly measure the panels vs. the roof to get the exact percentage.

[Leef33]

In general, I would include all costs associated with upgrading the roof and house and shingles necessary to install your solar panels.  It might be a stretch to include walls and foundation etc. But if you install solar panels on a thatch roof you are defeating Congress's intent of both replacing legacy electricity with solar and generating employment which eventually pays roughly 30% in taxes, which is what you are not paying.  

And the IRS doesnt look at ten houses and say three need a new roof, three can use the old roof, and one only needs 684 shingles updated to support 18 solar panels. They may look at a letter from a roofer that says not to put 40 solar panels on a 23 year old beat up roof, like my house, but they are more interested in verifying with documentation that you paid a roofing company to replace your roof and you didnt do it yourself at no labor cost and worse with free or stolen shingles but filled out the form based on the value of the new roof.

Comments have mentioned that nothing stops someone from building a house and claiming the entire cost for the tax credit.  The instructions do talk about the structural parts needed to support the panels, but the real limitation is that you can only offset the tax you owe. In 2020, if you only make enough to owe $20K in taxes, you can only offset $20k in tax credits. You can carry over a balance in 2021 and by 2022 this goes away, unless it is renewed. One thing is certain: Uncle Sam is not rebating more than you gave him. And most likely, those Powerwalls and roofers, and electricans and their employers, are paying about 26% of the money you gave them, in taxes, probably more.

I want to hear more people explain why they think Congress only wants solar shingles that act as roofs to qualify for the credit when solar shingles were still (and practically speaking, are still) in the R&D phase when the credit was first passed. 

[pbferrer2004]

For 2020 Tax year, could I claim 26% of solar panels and the new roof costs?

[Opus 17]

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@pbferrer2004 wrote:

For 2020 Tax year, could I claim 26% of solar panels and the new roof costs?

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Did you read the previous discussions in this topic?

A "new roof" is not eligible for the solar credit.  At most, you may be able to include any necessary repairs that are needed to allow the roof to carry the weight of the solar panels.  For example, if your roof is deteriorated and requires new plywood and shingles anyway, and you also add solar panels, the only part of the roof improvement that can be included as a cost of the solar installation is the extra cost due to adding the solar panels.  Such as, extra framing to carry the weight, or the cost of 7/8 plywood instead of 5/8 OSB.

Solar panels are eligible for a credit of 26% if installed and placed in service in 2020.  If the panels are not placed in service until 2021 (connected to the grid, fully inspected and turned on) then you claim the credit in 2021, even if you paid for them in 2020. 

[BMcCalpin]

Yes. As noted at this IRS webpage, the amount of credit available for installing a PV system is 26% is installed during tax year 2020. See https://www.irs.gov/newsroom/energy-incentives-for-individuals-residential-property-updated-question... 

Note the following caveats:

1. Only updates to your roof that were REQUIRED in order to install the solar panels for example, structural reinforcement) can be included in the cost calculation against which the 26% credit is determined. Don't believe solar panel vendors who tell you that you can reroof your entire home and apply it to the credit.

2. The credit is not-refundable. That is, it can be applied only to tax assessed on your income. For example, if your return shows that you owe $5,000 in tax (before applying withholding and estimated tax payments) but your credit is $6,000, then you can apply $5,000 of the credit to the 2020 tax return and carry over the unused $1,000 to 2021. You can continue to carry over if need be to 2022, however, it is not clear if Congress will renew the carry over after that. So taking this credit requires some tax planning on your part to make sure that you can effectively utilize it.