30% Federal tax credit of net cost?

[desmo907]

I have heard that the 30% Federal tax credit applies to the Net cost (Total cost MINUS any state incentives if these are paid directly to installer as they are here in CT).

Someone mentioned to me that they had heard of some applying the 30% Federal tax credit to the Total system cost. Seems risky to me..

The Federal form 5695 does say "...30% of your costs.."
I wonder how the IRS validates the costs?
I didn't see reference on the form to attaching a receipt....

[KRenn]

I have heard that the 30% Federal tax credit applies to the Net cost (Total cost MINUS any state incentives if these are paid directly to installer as they are here in CT).

Someone mentioned to me that they had heard of some applying the 30% Federal tax credit to the Total system cost. Seems risky to me..

The Federal form 5695 does say "...30% of your costs.."
I wonder how the IRS validates the costs?
I didn't see reference on the form to attaching a receipt....

The way it is done in most places is that you take the gross 30% off the total system cost and usually the utility will 1099 on any incentive that you may receive.


Example


$30,000 System

$5000 Utility Incentive

$10000 30% tax credit


Pay 30% taxes on $5000=$1500

$30,000-10,000-5000+1500=$16,500 total.


Even if the incentive goes to the installer, typically you'll still get 1099ed because you're receiving that benefit, regardless of whether it is up-front or on the back-end.

[desmo907]

The incentive is from a State Energy fund (not the utility) and paid directly to the installer.
There is no 1099 sent here.
The few quotes I have received have shown the 30% federal tax credit based on the lower amount (total cost - incentive) to show me my final net cost (after I file my income tax).

Just curious as to others experiences...

[KRenn]

The incentive is from a State Energy fund (not the utility) and paid directly to the installer.
There is no 1099 sent here.
The few quotes I have received have shown the 30% federal tax credit based on the lower amount (total cost - incentive) to show me my final net cost (after I file my income tax).

Just curious as to others experiences...

It would be wise to talk to your CPA/tax professional, nobody here is really qualified to give you that sort of advice. Generally most states and utilities are providing a 1099 after the fact to comply with existing tax law, whether or not you receive the rebate is irrelevant, you are the beneficiary of the incentive, not the installer.

If you are not being 1099'ed, then the net of the 30% is the "safe" way of doing it, but once again, speak with a licensed tax professional for the best possible advice.

[russ]

It would be wise to talk to your CPA/tax professional, nobody here is really qualified to give you that sort of advice. Generally most states and utilities are providing a 1099 after the fact to comply with existing tax law, whether or not you receive the rebate is irrelevant, you are the beneficiary of the incentive, not the installer.

If you are not being 1099'ed, then the net of the 30% is the "safe" way of doing it, but once again, speak with a licensed tax professional for the best possible advice.

The only possible excellent advice - 99% of the people that provide such information (like the barber) have zero idea. The IRS is not all that forgiving of 'honest' mistakes when one would have known better to start with if they talked to their tax preparer - officially and on the record of course.

[NJSolar]

If you need any information regarding Solar Incentives and Rebates in Connecticut[/URL], please take a look at the link. We are a provider of solar services and information on the East Coast and can assist you in the whole decision making process, from Step 1.

[tedlawrence]

solar incentives and rebates in Connecticut

I would recommend you visit this site for up to date info on Connecticut solar rebates and incentives.

Mod note - links are not allowed for newbies.

[tedlawrence]

Ok well we supply and install solar pv turnkey solutions in Connecticut and always apply the Federal Tax Credit the net cost, which is the correct method.

[bonaire]

http://energy.gov/savings/residential-renewable-energy-tax-credit

[nkohlimd]

Great link

Thanks for the helpful link

[Noob]

http://energy.gov/savings/residentia...rgy-tax-credit

Strange, every page there seems to be a rebadged version of the information at dsireusa.org , complete with links to it?

Both under the Dept. of Energy, but the one with the actual data is subcontracted to North Carolina State U. ?

[snic]

The way it is done in most places is that you take the gross 30% off the total system cost and usually the utility will 1099 on any incentive that you may receive.


Example


$30,000 System

$5000 Utility Incentive

$10000 30% tax credit


Pay 30% taxes on $5000=$1500

$30,000-10,000-5000+1500=$16,500 total.


Even if the incentive goes to the installer, typically you'll still get 1099ed because you're receiving that benefit, regardless of whether it is up-front or on the back-end.

I don't understand this at all.

First, where do you get the $10,000 tax credit? 30% of 30,000 is $9,000.

Second, where do you get the 30% tax rate from? There is no 30% federal tax bracket. It's 28% or 33%.

Third, the company I'm thinking of buying a system from says they never issue 1099s. The quote they gave me has a 30% federal tax credit based on the entire pre-incentive cost.

The question is, 1099 or not, am I liable for the federal (and state?) income taxes on the several thousand dollar incentive from NYSERDA - the New York authority that issues solar incentives to installers?

[KRenn]

I don't understand this at all.

First, where do you get the $10,000 tax credit? 30% of 30,000 is $9,000.

Second, where do you get the 30% tax rate from? There is no 30% federal tax bracket. It's 28% or 33%.

Third, the company I'm thinking of buying a system from says they never issue 1099s. The quote they gave me has a 30% federal tax credit based on the entire pre-incentive cost.

The question is, 1099 or not, am I liable for the federal (and state?) income taxes on the several thousand dollar incentive from NYSERDA - the New York authority that issues solar incentives to installers?

A. You're right, I wasn't paying attention and made a mistake, the tax credit is 30%, or $9000

B. Not sure what you mean about a tax rate, the tax credit is a 30% tax credit, either off the gross or net amount.

C. The installer doesn't issue the 1099, they aren't the one providing the incentive, the utility is. Contact the utility for further details on their policy regarding that.

D. Talk to an accountant, don't take the installers word on it....EVER. People have been audited and accused of attempted tax fraud for not adhering to the proper tax laws.

E. If you get a rebate its likely that you will get 1099ed by the utility and how much you owe will be dependent on whatever tax bracket you're in. If you don't get 1099ed, you're legally only entitled to taking the 30% off the NET or what actually came out of your pocket. The IRS issued guidance on this in 2010 to clear up any confusion. As I said, be sure to consult an accountant.

[inetdog]

As I said, be sure to consult an accountant.

And the first thing the accountant will probably discuss is the large number of ways in which a rebate is different from a tax credit, even though both of them reduce the amount you actually pay.

[snic]

A. You're right, I wasn't paying attention and made a mistake, the tax credit is 30%, or $9000

B. Not sure what you mean about a tax rate, the tax credit is a 30% tax credit, either off the gross or net amount.

C. The installer doesn't issue the 1099, they aren't the one providing the incentive, the utility is. Contact the utility for further details on their policy regarding that.

D. Talk to an accountant, don't take the installers word on it....EVER. People have been audited and accused of attempted tax fraud for not adhering to the proper tax laws.

E. If you get a rebate its likely that you will get 1099ed by the utility and how much you owe will be dependent on whatever tax bracket you're in. If you don't get 1099ed, you're legally only entitled to taking the 30% off the NET or what actually came out of your pocket. The IRS issued guidance on this in 2010 to clear up any confusion. As I said, be sure to consult an accountant.

With regard to B, what I mean is this: you wrote "Pay 30% taxes on $5000=$1500". I assume you meant that you get a 1099 for $5,000, so you have to pay taxes on that $5,000 as if it were income. But there is no 30% tax bracket, so most likely you'd pay either 28% or 33%. It's a minor difference in tax amount, but critical to understanding what you meant!

With regard to E, do you have a link to the IRS ruling on this? A clear document from the IRS would save the expense of an accountant, who would just tell me what's in that document.

Finally, putting it all together, I think what you're saying is that if you don't get a 1099, you have a choice of:

1. Taking the 30% federal tax credit on only the net cost of the system, and not paying taxes on the rebate; or
2. Taking the 30% federal tax credit on the entire system cost, and paying taxes on the rebate.

If you do get a 1099, of course your only option is #2.