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?

[tonylavictoire]

IRS Form 5695 says "No costs relating to a solar panel or other  property installed as a roof (or portion thereof) will fail to qualify  solely because the property constitutes a structural component  of the structure on which it is installed." Since the the roof would be the supporting structure, shouldn't the cost qualify for the credit?

[juliob · Accepted solution]

If you are replacing your roof to add solar panels, the cost pertaining to the roof cannot be added to the Resident Energy Credit cost. However, you can add it to the basis of your home since it is an improvement.

Even though the cost for the roof will not qualify for the Residential Renewable Energy Tax Credit, it may qualify you for the Non-business Energy Property Tax Credit. 

• https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Which-Home-Improvements-Qualify-/INF12...

In order to qualify for the credit, you will need to replace your roof with Metal or asphalt roofing material that meets or exceeds the Energy Star Program requirements. You can find more information on the which roofing materials are Energy Star, on the following website: 

• https://www.energystar.gov/about/federal_tax_credits/roofs_metal_and_asphalt

[TaxGuyBill]

There are two potential exceptions to that:
(1) If the roof joists and/or sheeting were not structurally able to support the weight of the solar panels, the cost of structurally reinforcing the roof could be part of the cost.
(2) You purchase specialized, highly-reflective shingles designed specifically to enhance the output of the solar panels.

[sunilmujumdar8]

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/replies/6515495">https://ttlc.intuit.com/replies/6515495</a> this conflicts with what IRS says for form 5695 "No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed."

[juliob]

"No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed."

The above quote referenced from IRS Form 5695 instructions is referring to the Residential Energy Efficient Property Credit and NOT the Non-Business Energy Property Credit. They are two different credits with different requirements. Please read part 2 of the instructions on IRS Form 5695.

[solarsacco]

The above quote is actually taken from a section titled "Qualified solar electric property costs" and it is 100% in regards to the solar tax credit. My CPA has solar and is very clear that any roof under the panels that is replaced in preparation for solar is eligible for the 30% tax credit using form 5695. TurboTaxJulio clearly does not know this information very well. TaxGuyBill is confusing the solar tax credit with a roofing tax credit that expired after 2014 for Energy Star shingles.

 Here is the full text or you can follow this link:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i5695.pdf">https://www.irs.gov/pub/irs-pdf/i5695.pdf</a>

Qualified solar electric property costs. Qualified solar
electric property costs are costs for property that uses solar
energy to generate electricity for use in your home located in the
United States. No costs relating to a solar panel or other
property installed as a roof (or portion thereof) will fail to qualify
solely because the property constitutes a structural component
of the structure on which it is installed. The home doesn't have to
be your main home.

[TaxGuyBill]

@solarsacco   No, I was referring specifically to the Solar Credit.

What does your CPA base his thoughts on?  Nothing that you posted indicates a roof would be included.  For MOST credits and deductions, there are limitations if an improvement "constitutes a structural component".  What you posted just says that limit does not pertain to the solar credit.  That does NOT say that everything done at the same time would be included in the credit.

There is nothing that indicates replacing your regular shingles would be included in the credit.  

[solarsacco]

The 5695 instructions are written awkwardly but what it says employs a double negative. It basically says that no cost relating to solar such as a roof or portion thereof will fail to qualify solely because it constitutes a structural component of the structure it's on. Meaning just because the house would need to have a roof anyway doesn't mean that the cost would not qualify for the solar tax credit. It actually says it more forcefully that no costs relating to solar will fail to qualify. I would definitely encourage anyone confused by this to consult a licensed CPA, even better if that CPA has solar and has looked at this closely.
On a side note I've been working in solar for half a decade and have never had anyone ever run into trouble including the roofing cost for the solar tax credit but people should limit themselves to the roofs that have solar.

[TaxGuyBill]

I agree, that is what it is saying.  However, that does NOT mean that everything in connection with the roof is deductible.

I've been a tax professional for many years and I HAVE looked at this closely, and I have not seen anything that specifically allows it (beyond what I had mentioned in my original comment).

Just because people claim a tax credit and the IRS does not audit them on it, does NOT mean that the credit is allowable.

[shakapad]

What scenario will qualify the cost of the roof (or portion of it)?

[solarsacco]

First thing I would say, is talk to a licensed CPA about your specific circumstances.

What most CPAs advise is that you can only claim the tax credit on roofs that have panels. Some CPAs interpret it more narrowly where the tax credit should be claimed based on the square footage covered by panels as a percentage of total roof square footage.

The home has to be a residence to claim it on the 5695 and it has to be your residence although it does not have to be your primary residence. You would not use the 5695 if the house in question was strictly an income property that you did not occupy at all.

Half way down on the right hand side is the portion of the tax credit instructions applicable to PV solar:

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i5695.pdf">https://www.irs.gov/pub/irs-pdf/i5695.pdf</a>

you can also go to the following and find help from the IRS near you

<a rel="nofollow" target="_blank" href="https://apps.irs.gov/app/officeLocator/index.jsp">https://apps.irs.gov/app/officeLocator/index.jsp</...>

[CA Solar Expert]

I've been doing solar as a career since 1998 and this has been a constant problem.

My two cents:

1) "Qualified solar electric property costs. Qualified solar
electric property costs are costs for property that uses solar
energy to generate electricity for use in your home located in the
United States. No costs relating to a solar panel or other
property installed as a roof (or portion thereof) will fail to qualify
solely because the property constitutes a structural component
of the structure on which it is installed. The home doesn't have to
be your main home."

See my explanation of the tax code language below. This is describing what "solar electric property" costs qualify. They are referring to roof tiles/shingles that ARE the roof in addition to the solar electric property. The 2nd sentence here is NOT referring to roofs, or the portion of the roof underneath panels, they are referring to the portion of the roof that is made up of solar roofing shingles, which are also a roofing structural component.

2) As someone else already said, just because someone successfully claimed the tax credit for a wrong amount, and didn't get audited and caught, doesn't at all mean they were correct. There is literally no proof of purchase or receipts or contracts or invoices that you are required to submit with the IRS form in order to prove how much you spent and what it was for. It is a very easy tax credit form to get away with anything. So, many people do.

3) By the logic that "the roof supports the panels, therefore they must qualify," then your entire house qualifies, too, right? Can't have a roof without a house. So heck, build a mansion and then put solar on it and claim 30% off. It's ridiculous, and almost 100% of the people arguing for using the tax credit for paying for a new roof are the ones wanting that extra money back and are doing whatever they can to rationalize it (or it's a solar salesperson wanting your sale). It's a selfish bias that is not based on facts. It's based on loose uninformed interpretation, and a want for money.

4) Just because one CPA interprets it to mean roofing costs are covered, does not mean that is correct. That just means they're willing to take on the liability of an audit. How many CPAs have allowed re-roofing to be included and then been audited? Tell me their stories, not the ones that haven't been caught.

5) Here is a link to the actual tax code itself, which is the end-all be-all on the subject:

https://www.govinfo.gov/content/pkg/USCODE-2014-title26/pdf/USCODE-2014-title26-subtitleA-chap1-subc...

What you'll notice first is:

"§ 25D. Residential energy efficient property
(a) Allowance of credit
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—
(1) 30 percent of the qualified solar electric property expenditures made by the taxpayer
during such year,"

So you get 30% of the "solar electric property expenditures." Roofing material is NOT solar electric property. Unless it is a solar shingle/tile.

Then next there's this:

"(d) Definitions
For purposes of this section—
(2) Qualified solar electric property expenditure
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."

A solar panel is obviously "property which uses solar energy to generate electricity." Roofing material is obviously not. Unless it is a solar shingle/tile.

Next is:

"(e) Special rules
For purposes of this section—
(1) Labor costs
Expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property described in subsection (d) and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.
(2) Solar panels
No expenditure relating to a solar panel or other property installed as a roof (or portion
thereof) shall fail to be treated as property described in paragraph (1) or (2) of subsection (d)
solely because it constitutes a structural component of the structure on which it is installed"

So here they clarify that labor costs can be included, as long as they are for the labor to install "property which uses solar energy to generate electricity," which is not a roof. Oh, and the labor to install piping and wiring is specifically called out. THERE IS NOTHING RELATED TO ROOFING LABOR OR COSTS.

The last part, called out as (2) SOLAR PANELS is describing...you guessed it...SOLAR PANELS. Not roofing. That's the section header: Solar Panels, which are qualified solar electric property because they use solar energy to generate electricity. It's all been previously defined here. It's referring to solar panel property that is installed as a roof (or a portion of a roof)...aka SOLAR SHINGLES.

Bottom line: there is absolutely NOTHING in the tax code, or the tax law, or the tax forms, or the tax form instructions, that are intended to explicitly allow for roofing costs, which are not solar electric property, to be included.

If anyone says otherwise, they are either A) someone buying solar who needs to re-roof and wants to rationalize getting more money, B) someone selling solar who wants money from the solar buyer that needs to re-roof, or C) a tax professional who is either not doing their due diligence, not paying attention, or doesn't care and will take the risk of no audit.

Claim the costs of a re-roof at your own risk. It's playing the odds of audit. And just because someone didn't get caught, doesn't mean it's right and that you won't get caught. That's the way life works, we all know that, right? I mean, people do illegal stuff all the time, accidentally or on purpose, and never get caught. And if that's what you base your questionable tax filings on, then why even bother coming here and asking questions?

[muftn001]

I respectfully disagree.  The sentence is very clear: "No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component
of the structure on which it is installed" .. if you interpret "or other property installed as a roof"  goes against your explanation that focuses on the words solar panel ... clearly the word OR OTHER PROPERTY is referring to any other materials being used as a roof.  It goes on to say that such property will NOT FAIL to qualify solely because the property constitutes a structural component.  This to me is clear that roofing work that is done to support a solar system CAN BE INCLUDED as part of your tax credit claim.  I would also go further and say that since you cannot do 50% of your roof if you need to do your roof in order to support solar then the entire cost of the roof is eligible for the tax credit.  I have asked two independent and unrelated CPAs, as well as H&R Block and they all agreed with me.  Do yourselves a favor - don't listen to people on these web sites as we are all throwing around our interpretations.  Read the paragraph and discuss what you feel with your accountant AND with recognized tax authorities.  From my perspective, the code clearly states that property installed as a roof to support solar will qualify.  

[BMcCalpin · Accepted solution]

The IRS instructions written for any form are NOT authoritative. Only the Tax Code itself, IRS notices, and Tax Court rulings can be used in an audit to defend a tax position (the instructions MIGHT be used to request an abatement on penalties and interest, but that is not what this thread is about). I say this to show that quoting the instructions is like quoting random content from the Internet - in an IRS audit, it won't count, even if the instructions were published by the IRS itself. Most taxpayers are not aware of this; this is why CA Solar Expert quoted the actual Tax Code.

I agree that the Tax Code wording is convoluted; unfortunately, while trying to say what they want to say, the authors of the Tax Code verbally contort themselves into pretzels in order to avoid rewriting large sections of other code. This is why it is normal for the IRS to issue one or more Notices to clarify what the new Tax Code on this or that item actually means. This also means that just reading the Tax Code is not sufficient; you have to read the applicable Notices as well, which is in practice quite difficult for the nontax professional (and for a lot of so-called "tax professionals" as well).

The Tax Code in question can be found at "26 U.S. Code § 25D. Residential energy efficient property" (https://www.law.cornell.edu/uscode/text/26/25D).

Subsection (d)(2) in the Section above states “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.” Note this definition well – the property being referred to uses solar energy to generate electricity.

But the issue here is about the roof under the solar panels. What about subsection (e)(2) in the same code?

“(2) Solar panels

No expenditure relating to a solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as property described in paragraph (1) or (2) of subsection (d) solely because it constitutes a structural component of the structure on which it is installed.”

Doesn’t that mean that the roof is part of the property eligible for the credit?

Such an interpretation misunderstands what the Tax Code states. (e)(2) states “property described in paragraph (1) or (2) of subsection (d)” And what does paragraph (2) of subsections (d) refer to? It refers to “property which uses solar energy to generate electricity”. That is, any property that is eligible for the credit under the status of solar energy property must in some direct way contribute to the production of solar energy to the generation of electricity.

Now we understand what the curious language of (e)(2) is trying to say – no expenditure which directly relates to generating electricity from solar energy will be disqualified just because that property is part of the structure of the house. But what on earth is the code talking about? The Tax Code is referring to property that generates electricity that is ALSO part of the house, e.g., shingles that are mini solar panels and shingles that are reflective of solar light to help generate electricity by focusing the sun’s rays to increase the efficiency of the solar panels or run a steam turbine to generate electricity or the like.

The reason that the Code has to specify this curious double negative in (e)(2) is because sometimes structural components of a house do generate electricity from solar energy. The purpose of the phrasing in (e)(2) is not to include other parts of the house that don’t generate electricity.

But normal composition or concrete or terra cotta or metal shingles don’t create electricity from solar energy. The solar electric system doesn’t care what kind of shingles they are, because none of them contribute to the production of electricity. Thus they are not considered “property which uses solar energy to generate electricity” and thus are not qualified for the credit. Note that this is true even if the roof is old and common sense would tell you to replace the roof first so that the solar panels don’t have to be removed in a few years in order to replace the shingles.

The only possible argument that can be made about including the roof expenses as part of the solar electric property would be if you had to reinforce the roof in order to support the shingles. But even in that case, the reinforcement would be part of the expenses, not the shingles that may or may not need to be replaced.

Lacking any specific Notice or court case, this still remains my interpretation as a tax professional of the law. However, there is another source of relevant input: private letter rulings. I am aware that a private letter ruling cannot be quoted as precedent and applies only to the specifics of the taxpayer’s query; however, they can give insight into the IRS’s thinking on tax issues such as this.

Private letter ruling [201130003] (http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irl2fef/1/doc) shows a discussion on whether all the components of a solar-powered air-conditioning system could be included in the solar electric property for the purposes of the credit. The letter shows that even though the “Condensing Unit” is part of the system, it is not considered solar electric property for purposes of the credit, for the simple reason that it doesn’t generate electricity. Neither do the shingles and other roof components, unless they happen to be electricity-generating shingles.

I suggest that before you accept the conclusion of random voices on the Internet (and of random tax professionals) that you find one who can support the conclusion that roofing shingles are intended to be part of solar energy property for purposes of the credit with the same level of detail as I have provided.

[muftn001]

First, I appreciate the effort you put into your responses but I continue to respectfully disagree with your assessment.  So let's read 26 U.S. Code § 25D. Residential energy efficient property and look at (d)(2) which states: "Qualified solar electric property expenditure.  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".  This is pretty straight forward and if I use this as the basis then clearly a roof cannot be included.  HOWEVER, (e)(2) then states as a special rule, "(2) Solar panels.  No expenditure relating to a solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as property described in paragraph (1) or (2) of subsection (d) solely because it constitutes a structural component of the structure on which it is installed".  

Now you have previously argued that the special section is labeled "Solar Panels" ... this does not explain why the first sentence states, "No expenditure relating to a solar panel or other property installed as a roof ...".  The sentence starts with relating to a solar panel and then amends this with the phrase OR other property installed as a roof which makes it clear that the roof which is a structural component on which the panels are installed cannot be excluded simply because the roof is a structural component.  Since the word solar panel is specifically called out at the start of the sentence then it follows that the "or other property" is NOT a solar panel which then implies that "this other property" does not generate electricity but is used solely as a structural component and thus cannot be excluded solely on the grounds that it is a structural component.  I have read this sentence a thousand times and I find no flaw in my interpretation especially given the structure of the sentence itself.  I also searched for any case law on any audits/cases that occurred which resulted in a claim for a roof replacement being denied when it was done and claimed as part of the Solar tax credit.  I find this in of itself to be rather interesting and telling.  If you have any evidence to show that the IRS has audited and denied the roof replacement portion of the claim then please do share that.  In the absence of this, I strongly urge people to not be scared into throwing away a significant deduction OR into claiming this deduction because of someone's opinion.  Read the code and then ask your tax lawyer what they think AND then challenge them by countering with the arguments I have put up or if your lawyer agrees with me, then what the other poster has posted.  After you have more information then make a decision for what you believe to be correct.  As for me, I plan to claim the roof replacement cost I will incur when I do my solar project as part of the tax credit and if I get audited, I believe I have the interpretation correct and I will win any audit.

Lastly, your private ruling example has no place in this argument since your example is about the disallowing of a condenser.  A condenser is not part of any structural component and is not a solar panel so it is obvious to me that it cannot be included.   However, this does not in any way imply that this logic extends to a roof as a roof is a structural component and according to (e)(2) cannot be solely excluded because it is structural in nature only.  I am strongly of the opinion that the special section was specifically added to include structural components since (d)(2) is otherwise quite clear what is permitted or not and the debate centers around what (e)(2) means and how it amends (d)(2).

Best regards and respectfully submitted