Audit: Residential Energy Credit

[depcot]

I am being audited and the IRS Form 5695 Residential Energy Credits for 2022 did not ask about the pool usage, and apparently it is required that energy used for the pool must be excluded. The IRS has calculated on their own and determined that 25% of our energy is used for our pool which is inaccurate. Why was this not part of the TurboTax calculations for 2022?

[DoninGA]

As stated in the IRS Form 5695 instructions (2022) - https://www.irs.gov/pub/irs-prior/i5695--2022.pdf

Costs allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage don't qualify for the residential clean energy credit.

There is no where on the Form 5695 to calculate pool usage - https://www.irs.gov/pub/irs-prior/f5695--2022.pdf

In the 2022 TurboTax desktop program for Energy Credits, the page labeled Enter Any Additional Energy-Efficient Improvements. there is a Learn More link for the Solar Electric Costs.  Clicking on Learn More opens the On Demand Tax Guidance window that provides this information for Solar Electric Property-

Enter the amount you paid for any property that uses solar energy to generate electricity for use in your home. The home does not need to be your main home. However, you may not include costs allocable to a swimming pool or hot tub.

[AmeliesUncle]

Which credit did you claim?  Unless you are counting the cost of the pool itself as an energy storage device, I can't think of how a pool would affect your credit.  I suspect that IRS auditor is incorrect.

[depcot]

Thank you for responding. We just claimed the Residential Clean Energy Credit and the CO-OP that we worked with in our city is completely baffled that this is happening. We didn't even mention the pool and haven't claimed anything related to it. In the process of our Residential Clean Energy Credit audit, the auditor said "It looks like you have a pool' and had us provide all of our electric bills and deducted 25% from our credit for pool usage.

[AmeliesUncle]

What did you install that qualifies for the credit?

Is the pool used for business?

It sounds like your tax return is being audited, so you'll want to ask the auditor for a citation for why owning a pool would affect anything (assuming there aren't additional details that I don't know about, they won't be able to provide an accurate citation).

[depcot]

No the pool is not used for business. We installed solar panels on our home and are being audited for claiming the solar credit.

[AmeliesUncle · Accepted solution]

As I said, I think the auditor is wrong.  If they say anything about §25D(e)(3), they are definitely wrong and they need to re-read the phrase "used as a storage medium".  That does not apply to merely heating or powering your pool.

[depcot]

Thank you. This is very helpful.