I leased solar panel for my main home. Is my solar energy monthly payments deductible?

[KatherineC · Accepted solution]

No, there is no deduction for the expense of leased solar panels on your home. 

It's equivalent would be utility payments which are only partially deductible if you have a home office deduction.  (If you partially claimed the lease payments on a home office, you would also have to partially claim any credit/payment you received for excess power generated by your solar panels.)

If the solar panels were purchased, you would be able to claim a credit for the qualifying amounts.

Please click here for further information about the Credit for Solar Energy.

[nadialevitcpa]

I looked over the link provided as well as IRS instructions for Credit for Solar Energy and I don't see it anywhere indicating that leased solar panels don't qualify for the credit. Can you please point me to the place on IRS website where it says it? Thanks

[KatherineC]

While some of the wording may be vague - you have to pay attention to the wording.
Leased equipment does not belong to you - so it can't be considered to be a home improvement.

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-drop/n-13-70.pdf">https://www.irs.gov/pub/irs-drop/n-13-70.pdf</a>
This is old, but still applicable. Look at page 6 of 12 and Question & Answer to #15

"For purposes of both credits, costs are treated as being paid when the original installation of the item is completed,"
<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>
If you are leasing you aren't paying the cost of the equipment.

 "If you made energy saving improvements to more than one home that you used as a residence during 2017" Leased items don't count as improvements to your home.

 "You must reduce the basis of your home by the amount of any credit allowed"
Purchased solar panels increase the basis of your house so the basis would also be reduced by the amount of the credit. Again, leased panels don't qualify as improvements.

If you had a lease-purchase agreement, the equipment would eventually qualify as being purchased and be considered a permanent improvement to your home.