New home buyer and Solar panels credit

[ani4manu]

Hi Team,

I am from California state, and bought a new home(newly constructed house) on year 2022.

This new home has Solar panels installed, which I bought (it's not under lease), and total home price includes this solar price.

Would like to know

- Can I get any credit for first time home buyer?

- I know I get a credit for my Solar panel. Does Turbo Tax Premier Desktop 2022 has option to add the solar panels to avail this credit?

Thanks

[SharonD007]

No, you will not be able to take the First-Time Homebuyer Credit for the 2022 tax year.  The first-time homebuyer credit was a refundable tax credit you could claim on your 2008, 2009, and 2010 federal income tax returns. The credit, worth as much as $8,000, is no longer available on homes purchased after 2010. There is legislation to create a new refundable tax credit of up to $15,000 for first-time homebuyers which was introduced in April 2021, but as of December 2022, the legislation still has not passed in Congress. Please review the TurboTax article Can you still take the first-time homebuyer credit? for further details.

Some states have tax credits and deductions to offset the cost of buying a house with a mortgage.  California offers incentives to first-time homebuyers in the state, including various tax credits. The Mortgage Credit Certificate (MCC) program is a tax credit incentive. It converts a portion of your mortgage payments into a federal income tax credit, but you have to qualify.  If you live in Los Angeles County review this website for more information Tax Credits for First Time Home Buyers. If you don’t live in LA County, please google your county for the MCC program.

Yes, you will be able to use TurboTax Premier Desktop 2022 to check if you are eligible for the Home Energy Credits. Please review the TurboTax articles Federal Tax Credit for Residential Solar Energy .

(edited 01/26/23|5:40 pm PST)

@ani4manu

[Opus 17]

I don't believe you are eligible for the solar panel credit under the circumstances you describe.

You can claim the credit if you purchase and install solar panels, even if the home is under construction at the time.  You are not eligible if the builder purchased and installed the solar panels and then sold the home to you with the solar panels attached.  (The builder may be eligible for a different credit.)

With whom did the solar company have a contract, you or the builder?

[Opus 17]

It has been pointed out to me that IRS Notice 2013-70 does allow the buyer to claim the credit even if the builder installed the solar panels.  The taxpayer must get a letter from the builder that breaks down the cost of the solar system, or the taxpayer must use some other "reasonable method" to determine what part of the home purchase price is the cost for the solar panel system.  (However, be aware that if audited, the IRS will want to see proof of what your "reasonable method" was to calculate the cost.)

https://www.irs.gov/pub/irs-drop/n-13-70.pdf

As suggested by the other answer, individual states may offer their own credits and they may have different rules.

Some additional tips:

Although the credit is normally claimed when the property is "installed", in the case of new construction, the credit is claimed when the buyer's original use of the property begins.  In other words, if the builder installed the solar panels in 2021 but you did not buy the home and move in until 2022, you would claim the credit on your 2022 tax return, not 2021.  

You may not claim a credit for energy efficient doors, windows, HVAC, or other appliances installed by the builder.  That credit is under a different section of the law (section 25C) and has different rules.  That credit only applies to items you directly purchase and install to a home you already own.

And lastly, remember that if you receive a state or federal credit, that reduces your cost basis in your home, which is used to calculate capital gains when you sell.  

[jwg03]

I bought a new construction home with solar panels in 2022... My builder says he claimed the solar tax credit, and energy efficiency tax credit already on his 2022 filings. I am a litle perturbed because I keep reading that I am eligible for this tax credit, but not if my builder already claimed it... I can't seem to find any information on who is is supposed to claim this tax credit ,the homebuyer or the builder?

[NCperson]

@jwg03 = doesn't it work out either way? 

if the builder states he took the credit, then presumably he was able to lower the price of the home offered to you by the amount of the credit, so you got the benefit in the selling price. 

if the busilder didn;t take the credit, then presumably he would have sold the home at a higher price amd then you get the same benefit by obtainin g the credit yourself. 

so in either case above, the net benefit to you is the same. 

The IRS is not going to pay the credit twice, 😁

[Opus 17]

@jwg03 

While I believe as a matter of principle that the builder and the buyer should not be able to claim credits on the same solar panel installation, I could not find that language specifically written in to the tax law.

Section 25D does say that the buyer of a home containing solar panels may claim the credit as long as they have a statement from the builder that specifies the cost of the solar panels, or they have some other “reasonable“ method of determining what the cost was. Remember that the IRS does not have to award any credit or deduction that you can’t prove with sufficient evidence, so if you find some “reasonable“ method to calculate the cost of the solar panel system, make sure you can prove that if audited. 

Section 25D does not say that the buyer may not use the credit if the builder already use the credit in section 48. However, at a minimum, you would have to reduce the cost of the system by the amount of the builder’s credit. For example, if the system cost to build a $20,000, but they received a $2000 credit, the net cost on which you could claim a credit would be $18,000.

The key element of the section 25D credit is that you must pay for the solar system installation. If you can prove you paid for the system, it seems that you may claim the credit regardless of what the builder may or may not have claimed. The law does not discuss the interaction of the two credits—and in reality, some homebuyers might never even know what the builder may or may not have done. 

If you are concerned, you should pay for an opinion from your own expert. As a taxpayer whose own tax money is being used to give these credits to other people, I don’t like the idea that the same system would be eligible for two different credits. However, the law does not appear to prohibit it.  

[jwg03]

Thanks for the replies!

Unfortunately, there was no discussion that the price was reduced due to his claiming of the tax credit... I believe he sold to us, passed the cost on to us, then claimed the tax credit as well. I also believe it is wrong for him to claim the tax credit, the rules are murky obviously, but one of the clear eligibility criterion is that the house where the solar is installed needs to be a primary or secondary residence. The home is a new build and was never his residence. There are credits builders get for building energy efficient homes, under 45L, but it seems to me 25C and D, should be for home buyers/owners...