Solar tax credit for rental property - "Residential" or "Non-residential credit"

[RobertB4444]

If you are in the same boat as the questioners above then you are going to pro-rate the amount that you paid for solar by the percentage of your home that is available as a personal residence.  The rental percentage of your home is not eligible for the credit.

@smudge1 

[Opus 17]

@smudge1 

You are a replying to a long discussion about several different topics, so I don’t know what your specific question is.

If you are claiming the residential solar property credit which is located in IRS code section 25D, that only applies to a home that you use as your residence.  It does not have to be your main home, and you don’t even have to own the home to claim the credit. You just have to pay for the solar system.  The amount you enter for the credit is the amount you contracted to pay for the property.  If you were paying the installer over time, you claim the entire contracted price when the solar property is installed. If you are dividing the solar system with other owners of the home, you only report the part of the price that you agreed to pay.

Because this credit is only allowed for your residence, if you also use the property as a rental (such as you own a duplex, and you live in half and rent the other half out) then you can only claim the portion of the cost that can be allocated to your residence, usually on a square foot basis.

[S_Bop]

Hi Oliflyer,

I'm in a similar situation and planning to have solar installed on my short-term rental property provided I'm able to claim the full credit. You mentioned that you claimed the entire credit on your filing. Did you get the full refund you expected?

[Oliflyer]

Hello S_Bop,

Yes I did.

If you read the entire thread you noticed that I had to claim the credit with 2 different "options", one for the time I was using the house, the other when it was rented. I don't remember the details, but it took me a while and several calls with the TTax "experts" to figure out how to do it. That was a year ago. 

Good luck.

[dcortez]

My TT version includes 3800 and 3468.  I entered a solar energy investment and it flowed through to my 1040. However, in reading the instructions for these forms it appears only non residential businesses are allowed to claim the tax credit.  A schedule E rental income property does not seem to qualify. 

Adding solar panels to my rental property will allow me to depreciate it over 5 yrs. And some think it will not increase my property tax.  But other than these benefits I see no reason to add solar roof panels other than to reduce electric utility bills that my tenants now pay for. 

[NCperson]

here is the IRS link to qualifications ; the home must be your main home where you live

https://www.irs.gov/credits-deductions/residential-clean-energy-credit

[dcortez]

That is correct.  A second home can quality but only in proportion to the time you occupy the home. Income real estate does not qualify.  The business solar energy investment tax credit does apply to businesses. Income real estate does not quality for this credit.  Also, I learned using TT that there is a limit on the solar credits. If you have BOTH a residential credit and a business credit there appears to be a cap.  You may be able to carry forward disallowed credits due to this cap .. not sure.  For sure, your residential credit is limited to you tax liability for that year.  I.e. if you credit is $20,000 but your total fed tax due is $10000, you can use only $10K. The other $10K can be carried forward .. I think for 3 yrs.  

[Oliflyer]

Hi dcortez, 

As I mentioned earlier in the thread, I followed the advice of the TT experts I spoke with.

Regarding your comment about adding solar panels to your rental property, I was in a different situation, I use the house part time, and do short term rental the rest of the time, so the investment made a lot of sense.

[AmeliesUncle]

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@NCperson wrote:

here is the IRS link to qualifications ; the home must be your main home where you live

https://www.irs.gov/credits-deductions/residential-clean-energy-credit

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Solar does not need to be for your main home.  It can be any "residence" of yours.

https://www.irs.gov/credits-deductions/frequently-asked-questions-about-energy-efficient-home-improv...

[dcortez]

my reading of the 3468 instructions is that the property must be owned by a business, C corp, S corp, ?? Don't then a residential property owned by a individual or LP qualifies. But check with the CPAs. 

[dcortez]

Yes, the developer or building of the residential property gets the credit .. not the individual who purchases the home from the builder. But check with the CPAs. 

[ID2913]

HI - is there no credit available for the rental side? And the %age used by the rental can only be depreciated? Thank you.

[NCperson]

@ID2913 - you are correct 

Who Qualifies

You may claim the residential clean energy credit for improvements to your main home, whether you own or rent it. Your main home is generally where you live most of the time. The credit applies to new or existing homes located in the United States.

You can't claim the credit if you're a landlord or other property owner who doesn't live in the home.

You may be able to claim a credit for certain improvements made to a second home located in the United States that you live in part-time and don't rent to others. You can't claim a credit for fuel cell property for a second home or for a home that is not located in the United States. Find more on qualifying residences.

https://www.irs.gov/credits-deductions/residential-clean-energy-credit

[dcortez]

Still trying to get this straight on vacation homes we use and rent part time during the winter season.

If we have a home that rents 30-40% of the time to tenants that stay for 2-4 months at time .. And the rest of the year the home is NOT rented and we use it as our vacation home.  We may come and go off season, but it is either vacant, occupied by us, but NOT rented. 

We would like to add roof top solar panels and batteries. Can we take the full solar energy credits (30% of installed cost I believe)?  Do we have reduce the credit amount for time the home is rented to vacation renters, say 30% of the tax year?

[ID2913]

Thank you - I should have provided more detail.

I live in a duplex, so if I install a system, that serves 2 equally sized units, is only 50% tac credit applied, and the other just depreciated on the rental properties (Sched E)?