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

[NCperson]

@dcortez - the credit is available on your MAIN home only.  

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.

I'd say it is a tall bar to reach to rationalize this home as your 'main home' when you describe it as your "vacation home" and it is rented out 5ish months of the year.  Further, the qualifications specifically state you can't take the credit on this 2nd home since you do rent it to others.  

[Opus 17]

@NCperson 

You are reading the wrong section.

Section 25D(d)(2) says that solar panels must be installed on a property used as a residence by the taxpayer, not a main or principal residence.

The term “qualified solar electric property expenditure” means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer.

Oddly, all the other energy generation equipment in section 25D also says "used as a residence", except for fuel cells, which must be installed on a "principal residence" 25D(d)(3)

https://www.law.cornell.edu/uscode/text/26/25D

Section 25C, the "Energy efficient home improvement credit" which covers air conditioning, furnace, heat pump, doors and windows, and so on, is also variable as to which components must be installed on "a residence" and which must be installed on a "principal residence".   "Qualified energy property" (air conditioner, heat pump, etc.) must be installed on a residence, while "building envelope components" (doors, windows, skylights" must be installed on a principal residence. 

https://www.law.cornell.edu/uscode/text/26/25C

Not sure exactly which IRS page you are quoting, but the difference is actually made more clear on this page.

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

Quoting:

• For the Residential Clean Energy Property Credit, the following requirements apply:
  • solar water heating property expenditures, solar electric property expenditure, small wind energy property expenditures, geothermal heat pump property expenditures, and battery storage technology expenditures: the home must be located in the United States and used as a residence by the taxpayer (includes renters); and
  • fuel cell property expenditures: the home must be located in the United States and used as a principal residence by the taxpayer (includes renters).

[Opus 17]

---

@dcortez wrote:

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?

---

See this page.

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

For solar panels, you must use the home as a residence.  A second home/vacation home is fine.

You must allocate the cost based on business use.  If the home is used 40% for business, then you can only include 60% of the solar system cost into the credit calculation. 

[AmeliesUncle]

---

@Opus 17 wrote:

For solar panels, you must use the home as a residence.  A second home/vacation home is fine.

You must allocate the cost based on business use.  If the home is used 40% for business, then you can only include 60% of the solar system cost into the credit calculation. 

---

The solar credit in §25D on Form 5695 is for a home used as a residence.  But the rental portion can qualify for the solar credit in §48 on Form 3468.

[beingcelery]

@NCperson and @Opus 17 and @RobertB4444 and others keep on jumping into this thread and repeating the same wrong information because they only know about the section 25(D) solar credit, and they aren't aware of the section 48 credit that is part of the Investment Tax Credit (ITC) reported on form 3468.   If they had read the other posts before replying, they would know that.

Yes, residential rental properties do qualify.  

No, it's not expiring (it was extended by the Inflation Reduction Act). 

No, you don't have to have an corporation or other entity.  

Yes, it's available to claim for rental properties you own in your own name. 

Use form 3468 to claim the credit. You do have to reduce your cost basis in the solar equipment by the amount of credit that you receive.  Also, an important caveat is that the credit can only be used to offset the taxes you pay related to the rental property.  If your rental property doesn't generate a taxable profit, the credit gets suspended until you can use it in the future (see tax form 8582-CR). 

[TomD8]

TurboTax has a help article on Form 3468:

https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-3468-investment-credit/L886W...

[AmeliesUncle]

---

@beingcelery wrote:

You do have to reduce your cost basis in the solar equipment by the amount of credit that you receive. 

---

Actually, you only reduce the Basis by HALF of the credit (see §50(c)(2)).