THE solar investment tax credit is available to both commercial under section 48 and to residential under section 25D for both solar water heating systems and photovoltaics property to generate electricity from sunlight.
To benefit from the credit, you must have a federal tax liability. You may be able to carry forward or carry back the credit if you do not have federal tax liability in the tax year of solar installation.
The investment tax credit is based on the amount of solar property investment. Both commercial and residential property placed in service in 2017, 2018, or 2019 the credit amount is equal to 30 % of the cost of eligible property; through 2020, the credit is 26 % of the cost of property placed in service in 2020; through 2021, the credit is 22 % of the cost of property placed in service in 2021; and after 2023 residential credit is 0% while 10% for commercial and utility projects.
The energy credit is 30% of the cost of the eligible property placed in service during the taxable year 2017, 2018, or 2019 of:1) qualified fuel property; 2) equipment which 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, excepting property used to generate energy for the purposes of heating a swimming pool under section 48(a)(3)(A)(i) but only prior to January 2017; 3) equipment which uses solar energy to illuminate the inside of a structure using fiber optic distributed sunlight but only with respect to property the construction of which begins before January 1, 2022 under section 48(a)(3)(A)(ii); and 4) qualified small wind energy.
Energy property under section48(a)(3) are:
• equipment which 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, excepting property used to generate energy for the purposes of heating a swimming pool,
• equipment which uses solar energy to illuminate the inside of a structure using fiberoptic distributed sunlight but only with respect to property the construction of which begins before January 1, 2022,
• equipment used to produce, distribute, or use energy derived from a geothermal deposit within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to but not including the electrical transmission stage,
• qualified fuel cell property or qualified microturbine property,
• combined heat and power system property,
• qualified small wind energy property, or
• equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to property the construction of which begins before January 1, 2022
• the construction, reconstruction, or erection of which is completed by the taxpayer,or
• which is acquired by the taxpayer if the original use of such property commences with the taxpayer,
• with respect to which depreciation or amortization in lieu of depreciation is allowable, and
• which meets the performance and quality standards if any which— have been prescribed by the Secretary by regulations after consultation with the Secretary of Energy, and are in effect at the time of the acquisition of the property.
What Form to use claim the solar credit?
• Use Form 5695 for residential to claim you residential energy credit in your personal income tax return.
• Use Form 3468 for commercial or business to claim the investment credit. Use Form 8453 to mail in paper attachments required to Form 3468 when filing electronically your individual income tax return.
• If two or more credits are claimed, you must also file Form 3800 General Business Credit.
• In lieu of tax credit eligible projects may take a grant under section 1603 of the American Recovery and Reinvestment Tax Act of 2009 by electing to forego tax credit.
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Disclaimer: Any accounting, business or tax advice contained in this communication is neither intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.
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Al-os & Associates Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.