I install 2 solar systems for my main house and the ADU. Can I claim energy credit for both houses in the same year?

[Chloe B Wells]

Hello, I installed 2 solar systems for the main house and our ADU in the same year. They have 2 different addresses but both are under our name and in the same property lot. At one point, we live in the main house and then we move to the ADU. 

Is it possible to claim energy credit for both houses? Can I use the unclaimed credit for next year?

Thank you

[NCperson]

1) what is an ADU? 

2) here  are the form instructions:   

https://www.irs.gov/pub/irs-pdf/i5695.pdf

and note: 

Residential Energy Efficient Property
Credit (Part I)
If you made energy saving improvements to more than one home that you used as a residence during 2021, enter the total of those costs on the applicable line(s) of one Form 5695. For qualified fuel cell property, see Lines 7a and 7b, later.

3) you are allowed to rollover the unused credits.  THe credits will reduce Line 22 of your tax return, but Line 22 can't go below zero - that is what creates the 'rollover' - the part that would otherwise reduce Line 22 below zero. 

[Chloe B Wells]

Thanks for answering my question.

1/ The ADU is a Accessory Dwelling Unit or a backyard house that is built in the same lot with the main house. 

2/ When you say "rollover the unused credits", how many years can we rollover?

Thank you

[NCperson]

2/ When you say "rollover the unused credits", how many years can we rollover?

as long as it takes to use them up.

[Carl]

Take note that if the ADU is used for the production of income (i.e.; you rent it out) different rules apply to that for the solar tax credit. I can't cite any specific regs or pubs at this time. But the last time I check (A long time ago) rental property did not qualify at all for a solar tax credit of any type. Rules may have changed since I last checked though.

[TomD8]

From the instructions for Form 5695:

"If you made energy saving improvements to more than one home that you used as a residence during 2021, enter the total of those costs on the applicable line(s) of one Form 5695."

https://www.irs.gov/pub/irs-pdf/i5695.pdf

Would your ADU meet that standard?

[Opus 17]

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@Chloe B Wells wrote:

Thanks for answering my question.

1/ The ADU is a Accessory Dwelling Unit or a backyard house that is built in the same lot with the main house. 

2/ When you say "rollover the unused credits", how many years can we rollover?

Thank you

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Form 5695 is used to claim the credit on a residence.

Minimum standard for a residence is probably a bathroom and a bedroom (and maybe a kitchen, depending on local building code.). Does the ADU have its own certificate of occupancy?  It might be a mother-in-law apartment or servants' quarters.  

If it does not have a C of O, then it is not a residence.  However, if the solar panels on the ADU are connected to your house (so it forms one system) that would count as being for your residence, even if the ADU is not an official residence.  (You can claim the credit for solar panels installed on a shed or a freestanding frame in the back yard as long as they service the residence.)

If you rent this dwelling unit, you can't claim the credit using form 5695 because that form and section of the tax code is for your personal residence, not business property.  But there is a separate business credit (I think) that we could research for you if needed.