Tax Credit on Equipment for Repairs

[Oyarsa]

This year I purchased a home that had solar panels installed in the backyard. The company that installed them had since gone out of business.

Shortly after moving in, the panels stopped working and I discovered that several of the microinverters were not functioning. Luckily I had purchased an extended insurance policy that covered the panels.

We decided to have the company that provided the repairs also move the panels to our roof and add in 6 more panels. Now it's tax time and I am trying to figure out what I can claim. Obviously, it would be great if I could claim the whole cost, but I imagine the cost of moving the old panels is not covered. I asked a tax professional and they suggested not claiming the cost of the new microinverters, as well.

My thought is that the microinverters are new equipment, despite them being installed to run old panels, and it was part of a new installation. I'm sure I should trust the tax professional, but if anyone has any extra insight, just in case...

[bob-n]

As a general rule: #1: read the tax form. If that's not clear, #2: ask a tax professional. Asking for advice from a bunch of strangers chatting on a web forum is a distant #3.

With that as preamble and with me warning you that I am not a tax professional...

I was under the impression that you get a tax credit for all expenses that are directly attributable to generating solar power. I thought that includes replacement parts. So if you used those microinverters to generate solar power, I thought that they would qualify.

I have a friend who replaced his array with new microinverters and new panels. I believe that he sold the old panels and old microinverters and took a tax credit for the purchase cost of the new stuff after it went on line.

Also, as you mentioned, I was under the impression that purchases must be for new equipment.

I'm not sure about whether you can claim a credit for spare parts. You could argue that parts are an expense required to make the system long-term reliable. They may argue that spares are not connected to the grid. It may be subject to interpretation. Despite best efforts, the tax code may not be absolutely complete and clear on every nuance.

I have no idea whether you can claim a tax credit for repair labor, but that sounds very unlikely.

As a practical matter, on the outside chance that you are audited and you are asked about it, save the receipts and photos of your installation. That combination should discourage an auditor from challenging on it you further.

But I am NOT recommending stretching the truth or filing a false return. Honesty is always best.

[peakbagger]

I agree that we and I are not tax advisors. I was told at one point that the federal rebate only applies to new never installed permanent systems and components. . Once you get the rebate there is no ruling that I am aware on how long it has to be installed, its an upfront subsidy (note there could also depreciation rules that apply and I dont pretend to deal with them. If you install a second system to pu tin more capacity you are also entitled to a one time rebate for that new installation. If you need to remove an old system I think what you do with it is your business.

I think its a very gray area on an upgrade or an old system where the rated capacity does not change, IMHO, if its new panels and an inverter on old racking with the same capacity that is something a tax advisor will need to weigh in. IMO its repair if the installed capacity does not change.

Spares are probably gray but if purchased with the install you are probably better off than a subsequent purchase. I do not think repairs would be covered as the capacity did not increase.

[Oyarsa]

I wish there was an easy way to ask for a determination from the IRS itself. As far as I can find, the most I can do is call them (something I will try, at least).

Thanks for the inputs, and I know to take everything here with a grain of salt.

I found two resources that make me think two different things. First is the tax code: https://www.law.cornell.edu/uscode/text/26/25D

In there, it specifies: 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.

To me, that would mean that the microinverters are a qualified solar electric property expenditure. I do not see anywhere in the tax code itself that states it has to be for a "system" or an original installation.

However, the second resource suggests otherwise: https://www.energy.gov/sites/prod/fi...Solar%20PV.pdf

In there, it specifically says the credit is for a photovoltaic system and that it has to be new and the original installation. That being said, considering all of the panels (new and old) are interconnected, is the whole system considered new? If I were to install a 22 panel system utilizing brand new equipment for everything, but using 16 used panels (only the panels being used), I wonder if everything other than the panels would be considered eligible...

[solarix]

To my knowledge, I've never had any of our customers hassled about their solar tax credits.

[bob-n]

Disclaimer - I am not a tax expert. Please don't sue me.

The first reference in your email (Cornell Law) looks pretty official. The second looks like fluff. Here is a link to the actual tax code, as mentioned in your first reference:

https://www.govinfo.gov/content/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleA-chap1-subchapA-partIV-subpartA-sec25D.pdf

From everything that I know, this is the law. Tax experts sometimes refer to published documents which are official interpretations of tax law. I don't know where to find them and am not qualified to comment on them.

I hope this helps.

[Ampster]

The best tax advice is to not take tax advice from anonymous sources on the Internet.
My experience taking tax credits during the past eight years has been similar to that of the customers of @solarix as mentioned in his post above.

I have taken tax credits on three EVs and two Solar systems and one battery powered inverter all without hassle.

[reader2580]

I just spent a boatload of money in 2020 moving my solar array. I bought new ground mount racking, four new panels, four new microinverters, an Enphase distribution panel, and a ton of other electrical supplies. I am going to claim the costs on my 2020 taxes for the solar tax credit. Obviously, the panels I moved and the Solaredge optimizers and inverters I moved will not be claimed again.

I am just telling you what I am doing. I am not recommending what you should do.

[foo1bar]

My reading of the code is that the credit is claimed in the tax year when the equipment is put in service.
So I would *guess* that new equipment purchased to expand or improve existing equipment would be claimed in the tax year you're buying that new equipment and putting it into service.

For one of the other posters - I don't think you would be able to claim any labor for moving equipment to a new site as that is not an expense that's part of putting new equipment into service.
(At least I wouldn't try to claim it, maybe somebody will say it's a grey area, but I think that would be pushing it too far and would expect to be slapped down if it came to an audit)

[reader2580]

My total expense for moving my existing panels was about $750 not including the new racking. I think it is fair to claim the new ground mount racking that I bought since part of it is for new panels.

$1,500 is for redoing my electric service which was required to incorporate a larger load side tap for my expanded solar array. Another $1,500 was to trench the line out to the array including the wire and conduit. I had to upsize the circuit due to the four new panels. I further upsized the circuit to handle a future 20 panel expansion.