Solar Energy Credits For Rental Property

Energy property is defined as any equipment which uses solar energy to generate electricity to a structure and equipment which uses solar energy to illuminate the inside of a structure sec.

Solar energy credits for rental property.

The federal solar tax credit also known as the investment tax credit itc allows you to deduct 26 percent of the cost of installing a solar energy system from your federal taxes. The residential renewable energy tax credit as the irs calls it can be an attractive way to save on the significant cost of installing solar panels or roofing an average sized residential solar. 48 is more favorable. 25d does not allow a solar tax credit for the cost of installing solar panels for use in residential rental property sec.

48 provides for a solar energy tax credit for the installation of solar panels as part of the general business credit under sec. 48 is the commercial energy credit for energy property placed in service during the taxable year sec. To claim the credit you must file irs form 5695 as part of your tax return. The term solar tax credit actually refers to two separate things.

If you end up with a bigger credit than you have income tax due a 3 000 credit on a 2 500 tax bill for instance you can t use the credit to get money back from the irs. Both credits on your residence or rentals are 30 of the amount actually paid for 2019. The itc applies to both residential and commercial systems and there is no cap on its value. First is the residential energy efficient property credit and second is the business solar investment tax credit but differentiating between the two is complicated.

For simplicity people in the solar industry just say solar tax credit or itc. There s no dollar limit on the credit for most types of property although the credit for fuel cells is capped at 500 per half kilowatt of power capacity. Filing requirements for solar credits. Solar hot water heaters solar electric equipment wind turbines and fuel cell property are examples of equipment eligible for the tax credit.

48 a 3 emphasis added. They are only available for your principal residence the one exception is if you have a second home that is rented part of the year then you can claim the credit only for the 4 products listed below for the portion of time in which you occupy the residence. Many rental property owners are not aware that these credits are available on their investment properties. For the business energy credit solar energy equipment qualifies if it is equipment that uses solar energy to generate electricity to heat or cool or provide hot water for use in a structure or to provide solar process heat except property used to generate energy to heat a swimming pool sec.