Solar Energy Credits For Rental Property

Filing requirements for solar credits.

Solar energy credits for rental property.

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. 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. 25d does not allow a solar tax credit for the cost of installing solar panels for use in residential rental property sec.

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. 48 provides for a solar energy tax credit for the installation of solar panels as part of the general business credit under sec. First is the residential energy efficient property credit and second is the business solar investment tax credit but differentiating between the two is complicated. You calculate the credit on the form and then enter the result on your 1040.

Solar hot water heaters solar electric equipment wind turbines and fuel cell property are examples of equipment eligible for the tax credit. 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. 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. 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.

48 is more favorable. To claim the credit you must file irs form 5695 as part of your tax return. Many rental property owners are not aware that these credits are available on their investment properties. 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. No none of the residential tax credits are available to owners of rental properties. On rental properties this is called the energy credit and it is part of the investment tax credit general business credit. 48 is the commercial energy credit for energy property placed in service during the taxable year sec.