Energy Effeciency (Solar) Credits for Personal Use turned Rental Property

[Balaji]

Hi,

In June 2019, we installed solar panels and battery system at our property, which was our primary residence. Later in the year, things happened and we had to move to a different part of the country and our house with the panels got rented.

How do I go about the tax credit for installing the system? Can I claim the entire 30% for 2019?

[VictoriaD75 · Accepted solution]

Installing alternative energy equipment in your home such as solar electric panels and solar water heating, can qualify you for a credit equal to 30% of your total cost. The credit is available through the end of 2019. After that, the percentage steps down each year and then stops at the end of 2021.

The credit is only available for improvements you make to your residence. This can apply to a second residence as well. But you can't take the solar credit on rental property, unless you also have personal use of the property - in which case you must prorate the credit according to your percentage of personal use.

Energy Tax Credit

[cowbman]

I have a similar question, thought I lived in the house for 2 years prior to converting it to a rental.

[VictoriaD75]

Living in the house for two years relates to a potential exemption of capital gains on the sale of property and is not related to taking tax credits for energy related updates. Did you install the solar panels in 2019 and was the property a rental in 2019?

[cowbman]

Contract in 2016 with 10% down, work completed in 2017. Property converted to a rental July 2018. Home owned/lived in since September 2015.

[VictoriaD75]

Did you take the credit in a prior tax year? You would not be able to take a credit in 2019 for work completed in 2017.

[cowbman]

I took the credit in 2017. I'm asking about the 5 year provision though.

[Balaji]

Thanks. For almost 80% of the year, we lived in this property (primary residence) and it was during this time that we installed the system. Looks like I'll get 80% of the 30% credit. Can I take the remaining 20% and consider towards depreciation calculations?

[ThomasM125]

Yes, you can depreciate the portion of the panels that you did not get a credit for.

[gems_0721]

Similar situation-- I took the tax credit while living in the home (personal use) in 2020, then converted the house into a rental property in 2020.  I have not depreciated the amount (minus the amount of the credit) yet (just slipped my mind!)-- can I still add it in 2021 or do I need to amend my 2020 return to do this?  Thanks. 

[AnnetteB6]

In order to be able to claim any depreciation for 2020 for the portion of the year that the property was used as a rental, you will need to amend the 2020 tax return.

You can enter the information for the Asset (solar panels) on the 2021 return, showing that it was placed in service as part of the rental in 2020.  The current year and future years' depreciation will be calculated, but you will not be able to claim any amount for 2020 without amending.

@gems_0721