Solar Energy Credits For Rental Property

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

Solar energy credits for rental property.

On rental properties this is called the energy credit and it is part of the investment tax credit general business 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. Filing requirements for solar credits. 48 provides for a solar energy tax credit for the installation of solar panels as part of the general business credit under sec.

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. The term solar tax credit actually refers to two separate things. 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. You calculate the credit on the form and then enter the result on your 1040.

48 is more favorable. 48 a 3 emphasis added. First is the residential energy efficient property credit and second is the business solar investment tax credit but differentiating between the two is complicated. 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.

No none of the residential tax credits are available to owners of rental properties. 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. For simplicity people in the solar industry just say solar tax credit or itc.

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. Both credits on your residence or rentals are 30 of the amount actually paid for 2019. Solar hot water heaters solar electric equipment wind turbines and fuel cell property are examples of equipment eligible for the tax credit.