Can I deduct a portion of my investment in solar panels as an asset for a rental unit in my home?

[KASinOR]

In early 2024, I invested in solar panels for my home, and I am claiming that investment as a clean energy tax credit for 2024.  However, I have a basement apartment in my home that comprises roughly 30% of the home's square footage.  Can I also claim the roughly 30% of the cost of the solar panels as a capital improvement for the basement apartment?   If so, exactly where do I do so in Turbotax. 

[AmeliesUncle]

The "Residential Clean Energy Tax Credit" for solar has rules if it is used less than 80% for personal purposes.

I suspect you need to claim 70% of the cost as the Residential Clean Energy Tax Credit on Form 5695.  Then claim the other 30% on Form 3468 for the rental portion.

Yes, you can depreciate it for the rental.  You would depreciate 30% of the cost, MINUS 1/2 of the business credit on Form 3468.  In the rental section, you would enter an "asset" for depreciation, and it would usually be depreciated over 5 years.

[Opus 17]

No "suspect" about it.  The homeowner claims 70% of the cost for the personal tax credit.  The other 30% is a business expense.  The asset is added to the property and depreciated, and there is a separate (different) business solar energy credit that can be claimed for the 30% rental portion. 

[KASinOR]

Thanks for your answer.  I did enter the approximately 30% of the cost as a new asset under my rental property, but it looks like it is being depreciated over 27.5 years, not 5 years.  Does that sound right to you? 

[PatriciaV]

Yes, as a rental improvement, the solar installation would be depreciated over the same period as the residential property, which is 27.5 years.

@KASinOR 

[AmeliesUncle]

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@KASinOR wrote:

 I did enter the approximately 30% of the cost

it looks like it is being depreciated over 27.5 years, not 5 years.  

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Did you enter the rental percentage MINUS 50% of the business/rental solar credit?

Although many electric items take on the lifespan of the building, solar is depreciated over 5 years.  Perhaps entering it as an appliance may do the job.