Renewable Energy Tax Credit
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What types of solar electric systems qualify for the Federal Solar Investment Tax Credit?
- ANY complete solar power package, for home or business.
- Product purchases that expand your existing solar power system and include at least one solar panel.
- Solar System for RV and boat that has been accepted by the IRS as a second home for tax purposes.
Some Facts Regarding Eligibility of the Federal Tax Credit
- The home served by the system does not have to be the taxpayer’s principal residence.
- If the federal tax credit exceeds your tax liability, the excess amount may be carried forward to the succeeding taxable year.
- There is no ceiling on the tax credit.
- Applies to equipment AND installation costs.
- For Residential Renewable Energy Systems, use IRS Tax Form 5695 to report your expenses. (It can be used for any residence, not just your primary one.) Learn more about residential tax credits.
- Commercial systems have similar guidelines as residential systems but use IRS Tax Form 3468. Lean more about commercial tax credits.
FEDERAL TAX CREDITS IN EFFECT THROUGH 2023
In December 2020, the Investment Tax Credit was included in the COVID relief package which extends the 26% credit for residential solar to the end of 2022. It then steps down to 22% in 2023 and expires completely in 2024.
- 26% for systems placed in service after 12/31/2019 and before 01/01/2023
- 22% for systems placed in service after 12/31/2022 and before 01/01/2024
- There is no maximum credit for systems placed in service after 2008.
- Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2024.
RVs and the Solar Federal Tax Credit
** Every individual's tax situation is different. Please consult a tax professional to make sure your situation is applicable. The following is for educational purposes only and does not constitute legal advice.
The law permitting the federal tax credit is 26 USC Section 25D. It says:
(2) Qualified solar electric property expenditure
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.
And the IRS definition of "dwelling unit":
A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. It also includes all structures or other property belonging to the dwelling unit. A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities.
Finally, is an RV considered a mobile home? For that we look to this US Tax Court memo 2014-160 on Jackon Jackson v. Commissioner, page 14:
This Court has previously held that a motor home qualifies as a dwelling unit within the meaning of section 280A(f)(1)(A). See, e.g., Haberkorn v. Commissioner, 75 T.C. 259, 260 (1980); Dunford v. Commissioner, T.C. Memo. 2013-189, at *23-*24; Perry v. Commissioner, T.C. Memo. 1996-194, slip op. at 14.
Although we use the more modern term throughout this opinion, an RV and a motor home are one and the same thing. Petitioners and counsel used the two terms interchangeably at trial. Accordingly, petitioners’ RV is a dwelling unit for purposes of section 280A.