Is a new electrical panel box & new breakers deductible?

[MinhT · Accepted solution]

If this equipment is for your home (residence), it is not deductible.

If this is for a rental property, it is deductible as repairs if it costs less than $2,500. If it costs over $2,500, the equipment has to be capitalized and depreciated.

[P_Ohana]

If the cost is below $2500, can I elect to depreciate?

[Ericka4]

this is from the irs website. 

You may be able to take the credits if you made energy saving improvements to your home located in the United States in 2023.

Home.

 

A home is where you lived in 2023 and can include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.

You must reduce the cost basis of your home if a residential energy credit is allowed for any expense for any property. The increase in the basis of the property that would result from the expenses will be reduced by the amount of the allowed credit.

Main home

 

Your main home is generally the home where you live most of the time. A temporary absence due to special circumstances, such as illness, education, business, military service, or vacation, won't change your main home

Costs.

 

For purposes of both credits, costs are treated as being paid when the original installation of the item is completed, or, in the case of costs connected with the reconstruction of your home, when your original use of the reconstructed home begins. For purposes of the residential clean energy credit only, costs connected with the construction of a home are treated as being paid when your original use of the constructed home begins. If less than 80% of the use of an item is for nonbusiness purposes, only that portion of the costs that is allocable to the nonbusiness use can be used to determine either credit.

[nerobins]

does this deduction still hold true for 2024 taxes? If the cost is over the $2500, can you expense the 2500 and add the remainder to the basis?

[VictoriaD75]

For tax year 2024, there are two credits available: Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit. The credit is 30% of the costs paid plus installation, with individual credit limits. For electric panels, the limit is $600. The article below states the following:

Which home improvements qualify for the Energy Efficient Home Improvement Credit?

Beginning January 1, 2023, the credit becomes equal to the lesser of 30% of the sum of amounts paid for qualifying home improvements or the annual $1,200 credit limit. In addition, to the aggregate $1,200 limit, annual dollar credit limits apply to specific items including:

• home energy audits: $150
• exterior doors: $250 per door (up to $500 per year)
• exterior windows and skylights, central A/C units, electric panels and related equipment, natural gas, propane and oil water heaters, furnaces or hot water boilers: $600

Any costs in excess of the costs applied to the credit can then be added to basis. Per the IRS:

You must reduce the cost basis of your home if a residential energy credit is allowed for any expense for any property. The increase in the basis of the property that would result from the expenses of the improvements to your home will be reduced by the amount of the allowed credit.

2024-2025 Energy Tax Credit: Which Home Improvements Qualify?

Energy Efficient Home Improvement Credit

IRS Publication 551

@nerobins 

[Opus 17]

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@nerobins wrote:

does this deduction still hold true for 2024 taxes? If the cost is over the $2500, can you expense the 2500 and add the remainder to the basis?

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You are adding on to a very old discussion that combines old and new laws and business and personal property, and you have not explained your situation. 

For business property, you can usually choose to expense improvements under $2500.  If the improvement is more than $2500, you must list it as an improvement for depreciation.  You may not expense the first $2500 and depreciate the rest.

For personal property, there is no tax deduction for property improvements.  Property improvements are added to the cost basis, and may reduce your capital gains when you sell.  There is a tax credit of 30% on the cost of certain energy efficiency improvements.  If you upgrade your panel box as part of installing some other energy efficient improvement (for example, a heat pump or solar system), and if the upgrade is at least 200 amps, then you can also claim a tax credit for the panel upgrade.  This is a credit, not a deduction.