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Form 5695 tax credit when installation spans multiple years

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  • Form 5695 tax credit when installation spans multiple years

    I purchased my panels in 2019, but will not install them until this year (2020). My understanding is that since the cost of the panels will exceed 5% of the final cost of the system, that I am grandfathered in for the 30% tax credit (which reduced to 26% in 2020). But I'm confused about how to fill in Form 5695.

    1. Am I able to take ANY tax credit for 2019, since the system didn't become operable that year, or do I have to wait to take the credit on my 2020 tax return ?
    2. When I take the credit in 2020 (hopefully for just the amount I spent in 2020, not the entire amount), how will I claim the grandfathered 30% instead of the 26% ?
    Last edited by RShackleford; 02-01-2020, 04:13 PM.

  • #2
    What does your tax professional say about it ?

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    • #3
      Since you are filing out the form yourself take the amount of the panels on the form. The worse case is that it is disallowed for 2019 and you have to take it in 2020. Put the amount you saved in a savings account in case it doesn't fly with the IRS. If the IRS questions you, tell them that some anonymous person on the Internet told you to do it that way and that you promise to never do it again. LOL

      Otherwise spend the money on a tax professional.
      9 kW solar, 42kWh LFP storage. EV owner since 2012

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      • #4
        I don't have a tax professional.

        Seems like a pretty straightforward question, and I imagined some DIY person here would've come across this situation. But for most people, I guess a company installs it and you pay 'em one big bill. Still, since the IRS explicitly states that you're allowed the 30% credit if you spend just 5% of the cost in 2019 (or begin "substantial work"), that clearly is imagining a situation such as mine where the cost is split over 2019 and 2020.

        I guess I'll take it this year. My philosophy with taxes (and some other things) is the old adage "forgiveness is easier to get than permission".

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        • #5
          I think that is a very reasonable interpretation.
          9 kW solar, 42kWh LFP storage. EV owner since 2012

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          • #6
            I am not a tax professional. This is only information I have read, not advice. That said:

            Here's what I found on the web:
            https://www.seia.org/initiatives/sol...tax-credit-itc
            "...Note that this guidance applies to residential and commercial solar projects differently."
            https://www.seia.org/research-resour...-itc-phasedown
            "...You may have heard about “safe harbor” provisions that allow businesses to lock in the 30% rate if a project “commences construction” in 2019 and is completed before January 1, 2024. This safe harbor only applies to business-owned systems and is not available for systems purchased by homeowners for residential use."

            There's lots more information on these websites.
            7kW Roof PV, APsystems QS1 micros, Nissan Leaf EV

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            • #7
              To follow up, from the same website:
              "If a homeowner buys the solar energy system outright (either paying cash or financing with a loan), they cannot use any commence construction safe harbor provisions. To receive the full 30% residential solar tax credit, the system must be “placed in service” before the end of the day December 31, 2019. It is not enough to have signed a contract, or to have made a down payment or even to have begun construction. There is no bright-line test from the IRS on what constitutes “placed in service,” but the IRS has equated this with completed installation in a Private Letter Ruling. The residential credit is claimed on the tax return for the year in which the qualifying expenditures are incurred, and the tax rules say the costs are incurred when the system installation has been completed."
              7kW Roof PV, APsystems QS1 micros, Nissan Leaf EV

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              • #8
                Originally posted by bob-n View Post
                The residential credit is claimed on the tax return for the year in which the qualifying expenditures are incurred, and the tax rules say the costs are incurred when the system installation has been completed."
                Well crap. But thanks. I read this as saying (if I finish the thing this year, which I intend) that I can't take the credit until my 2020 return and I only get 26%. Or, I could feign ignorance ...


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                • #9
                  Those rules apply if you want a safe harbor. I have been a sailor all my life and it is always more interesting outside the harbor. I have been through two business audits when I was CFO.
                  9 kW solar, 42kWh LFP storage. EV owner since 2012

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                  • #10
                    Originally posted by Ampster View Post
                    Those rules apply if you want a safe harbor. I have been a sailor all my life and it is always more interesting outside the harbor. I have been through two business audits when I was CFO.
                    I have gotten the CP2000 letter (kinda the mildest audit, I believe) and resolved 'em quickly (phone calls) with the IRS agreeing that I did nothing wrong. I like to think that makes it less likely that they would investigate me again.

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                    • #11
                      Originally posted by RShackleford View Post
                      I could feign ignorance ...
                      You might argue about interpretations with the IRS, but feigning ignorance after what you may have learned here might be considered deceptive by some. Just sayin'.

                      My 1st wife was a CPA. Now, I always take the same checkbook I pay my current accountant from to any audits - 2 so far.

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                      • #12
                        Originally posted by J.P.M. View Post

                        You might argue about interpretations with the IRS, but feigning ignorance after what you may have learned here might be considered deceptive by some. Just sayin'.
                        Hey man, that thing above (post #7) was a private letter. Me, I just answer the questions that Turbotax asks me as truthfully as I can, and let the chips fall where they may

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