Solar Tax credit when the installation spans across two years

[badsub]

My solar system installation started in 2022 but will only finish in 2023 due to unforeseen delays. Part of the payment for the system was done in 2022, while the balance will be done in 2023 post completion of work. As I'm allowed to claim solar tax credit only once, my options are

1. Claim the complete solar tax credit in 2022 taxes even though I have not made the complete payment.

2. Claim solar tax credit in 2022 taxes for the amount that has already been paid, but I would not be able to get tax credit on the balance amount paid in 2023.

3. Claim the complete solar tax credit in 2023 taxes even though only partial payment was made in 2023.

Are there any other options? What would you recommend?

Thank you

[DoninGA]

You can only claim the solar credit when the installation is completed.  So if the installation is completed during 2023 the credit has to claimed on your 2023 tax return.  The cost of the installation including the labor cost is reported on IRS form 5695.  You report the total cost to install regardless if you are paying monthly on a loan for the solar system.

[badsub]

Thanks for the quick response DoninGA. I'm paying for the system out of pocket without taking a loan, and the payment is split as 75% in 2022 and 25% in 2023. Even though I'm making 75% of the payment in 2022, I can claim 100% of the installation cost for federal tax credit in 2023. Is my understanding right?

Thank you

[NCperson]

@badsub correct 

[Critter-3]

When/how you pay for the system is immaterial…the credit is only taken in the year it is fully functional. 

[Carl]

75% in 2022 and 25% in 2023

You can't claim anything for 2022, since the system was not fully operational in 2022. You claim 100% on your 2023 taxes next year, assuming the system becomes fully operational in 2023.

It doesn't matter that payments were split across tax years. The total cost is claimed in the tax year the system becomes fully operational.