Solar tax credit for short sale home

[csak13]

We are looking into buying a short sale home that very recently had solar installed (late last year). The solar lien is outstanding and the lien holder will not release the lien against the house without the debt being satisfied. We would potentially be paying down a portion of that lien in a separate transaction for it to be released and to secure the house. My question is: would we be able to claim the solar tax credit on that portion we are paying against the existing lien? For all intents and purposes we are paying that money for the solar system. 

I know it's a rare scenario since those who install solar don't often immediately turn around and sell their home. I have not found a lot of info online.

[Opus 17 · Accepted solution]

Sorry, no. It just increases the price of the house to you. The credit is only available to the person who installed it and the credit is effective on the date that the solar installation was placed into service (turned on).   

The seller is still eligible for the credit even though the lien has not been paid. Because the loan is in their name and must eventually paid back by them, the seller is eligible for the credit. 

You should take this into account when you negotiate a price.

[csak13]

Thanks for the response! In this case, with it being a short sale, the loan would not be paid (any more) by the seller, it would be satisfied by us. What if they never took the credit themselves? I don't know this information yet, but we are finding out.

[csak13]

The solar payment would be in a completely separate transaction from the home purchase. Not sure if that matters.

[Opus 17]

Even if it's a separate transaction, you still are not eligible for the credit. And for tax purposes, it would be considered part of the purchase price.  

 There is no way for you to get someone else's tax information legally. Just be aware that they are eligible for the credit if they owned the home when the solar was installed, unless they are disqualified for some other reason.

[Stcruzzer]

Why do I not get the full credit for installing solar in 2021and how does turbo tax pick up the balance transferred to 2022.

[AnnetteB6]

You may only be able to claim a partial credit on your current tax return depending on your total tax liability as compared to your Residential Solar Energy Credit.  

The Residential Solar Energy Credit is not a refundable credit.  This means that if your tax liability (the amount of income tax you owe) is less than the amount of your calculated solar energy credit, then you will only be able to claim an amount up to your tax liability.  This means that your refund would increase by the amount of credit that was used on your return.  If there is any solar energy credit left over, then it can be carried forward and used on a later tax return.  

If you use TurboTax for your 2022 tax return, the carryforward amount should be automatically included with your return.  If for some reason it is not included, you will be able to enter the amount directly by looking at your 2021 Form 5695 line 16.

To learn more, take a look at the following TurboTax article:  Federal Tax Credit for Residential Solar Energy

@Stcruzzer