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dunkinchris
Level 1

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

I'm trying to see what exactly are the requirements especially with Inflation reduction act passing.
9 Replies
Critter-3
Level 15

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

Your parents can claim the credit since they own the home ... to reduce the cost basis of home you must own the home. 

 

per the IRS: 

 

Who Can Take the Credits
You may be able to take the credits if you made energy saving
improvements to your home located in the United States in
2021.


Home. A home is where you lived in 2021 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 basis of your home by the amount of
any credit allowed.

NCperson
Level 15

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

Either you or your parents can take the credit. You are eligible since you live in the home; owning it is not  a requirement - "Liviing" in the home is the requirement.....

 

 

You may be able to take the credits if you made energy saving  improvements to your home located in the United States in
2021.


Home. A home is where you lived in 2021 and can include a  house, houseboat, mobile home, cooperative apartment,
condominium, and a manufactured home that conforms to Federal Manufactur

Opus 17
Level 15

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

You are eligible if you pay for the improvement, and if you live in the home as "a" residence.  It doesn't have to be your main home or a home you own.  

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Mike9241
Level 15

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

you have probably made a gift to your parents for the cost. I would think their cost basis would go up by the cost of the solar reduced by the tax credit you get.  don't know how much you are spending so can't say whether or not you need to file a gift tax return. 

NCperson
Level 15

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

@dunkinchris  the gift tax return requirement in 2022 is if you give more than $16,000 to an individual (so giving $32,000 or less to your parents would not trigger the gift tax return).  I've read that this may rise to $17,000 per person in 2023. 

dunkinchris
Level 1

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

Is there more concrete answers? The answers so far seem to contradict each other.  Apologies in advance as this is my first time posting here and the solar credit info has been little to none in really specifying who is eligible as far as not outright owning the home. 

NCperson
Level 15

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

@dunkinchris what do you see as the contradiction?  I don't see it.  What was posted above was directly from the IRS instructions 

 

https://www.irs.gov/pub/irs-pdf/i5695.pdf

 

Who Can Take the Credits
You may be able to take the credits if you made energy saving improvements to your home located in the United States in  2021.


Home. A home is where you lived in 2021 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

 

 

The IRS says nothing about whether who owns the home, it just states it has to be your home and then goes on to define what a home is. 

 

If you are looking for specific IRS documentation whether ownership is required, you will not find it.  THe IRS tends to be vague and their statements above incorproate your question.  They do not care who owns the home; they care about whether your lived in this howe. 

 

 

 

if you lived in this Home in 2022 it is "your home".  Period. 

Critter-3
Level 15

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

My position is this ... the IRS says you must "reduce your basis in your home" by the credit and you cannot do this if you do not own the home.   Some say that doesn't matter but the way the instructions are written it keeps referring to YOUR home and it being constructed (only owners build their homes) and if this was a condo you own.  

 

From the IRS form 5695 instructions :  

 

Who Can Take the Credits
You may be able to take the credits if you made energy saving
improvements to your home located in the United States in
2021.
Home. A home is where you lived in 2021 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 basis of your home by the amount of
any credit allowed.
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 energy efficient property 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.
Only the residential energy efficient property credit (Part
I) is available for both existing homes and homes being
constructed. The nonbusiness energy property credit
(Part II) is only available for existing homes.
IRS guidance issued with respect to the energy credit
under section 48, such as Notice 2018-59, does not
apply to the residential energy credits.
Association or cooperative costs. If you are a member of a
condominium management association for a condominium you
own or a tenant-stockholder in a cooperative housing
corporation, you are treated as having paid your proportionate
share of any costs of such association or corporation.

Opus 17
Level 15

I live with my parents at their house. It is where I live but I am not on the title. If I pay to have solar panels installed, Can I claim the credit or my parents?

@Critter-3 

You're right but in the wrong way.

 

Section 25D clearly says that a person qualifies for the credit if the use the home as a residence.  It does not have to be their main residence and they do not have to own it.

 

Regarding basis, 25D says:

For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.

 

In other words, if a basis adjustment is allowed, it must be reduced.  But as you point out, if a resident who is not an owner pays for the improvement, no basis adjustment is allowed.  That's not a conflict--if there is no basis adjustment, there is nothing to reduce.

 

Example:

John owns the home, Mary is a resident.  John paid $100,000 for the home.  If John installs a $20,000 solar system and gets a 30% credit, John's adjusted basis in the home is $100,000+$20,000-$6,000=$114,000.  However, if Mary pays for the system and gets a $6,000 credit, John's basis remains $100,000.  John does not get a positive adjustment for the system, therefore there is nothing to subtract. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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