A SOLAR electric residential property to be qualified for the credit must meet the following requirements:
1. Costs paid must be for qualified for solar electric property.
2. Qualified solar electric property costs: These costs must be for use of solar energy to generate electricity. You may rely on the manufacturer’s certification in writing that a product is a qualifying property for the credit. Keep the certificate for your records.
3. Qualified solar water heating property costs: These costs must be to heat water for use in your residence. At least half of the energy used by the solar water heating property for such purpose is derived from the sun. The property must be certified for performance by the nonprofit Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed. For a summary of water heater systems ratings with names and addresses of participating suppliers visit SRCC’s website: www.solar-rating.org.
4. Costs: Includes installation, labor, preparation, wiring, etc. Refer to Form 5695 for a complete listing.
5. The electricity must be for use in a residential energy efficient property. 6. The residential property must be located in the United States and must be used as a residence by the taxpayer. 7. The residential property does not have to be the taxpayer’s principal residence.
8. The credit for residential solar electric property does not include any specific certification or output requirements. Any costs incurred for solar electric property qualify for the credit subject to the requirements discussed above.
9. Check requirements for any available state and local incentive programs prior to commitment.
10. Before January 1, 2017: If property is placed in service before 2017 , the credit amount is generally 30% of the cost of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, and fuel cell property.
11. After December 31, 2016 but before January 1, 2022: If the property placed in service after December 31, 2016 and before January 1, 2022, the credit is available only for eligible solar electric property and solar water heating property.
12. In 2017, 2018, 2019: The credit amount is equal to 30 %of the cost of eligible property placed in service in 2017, 2018, or 2019.
13. In 2020: The credit is 26 % of the cost of property placed in service in 2020.
14. In 2021: The credit is 22 percent of the cost of property placed in service in 2021. HERO loan or PACE for property assessed clean energy loan: These loans are used to primarily finance high cost solar energy. Payments for these loans are added to the property tax bill. Proper treatment of these costs are principal portion is non-deductible and interest is deductible as debt interest related to home acquisition. It is important to know that the costs related to qualified electric residential property increases the cost of your property but is reduced by the amount of the credit claimed in your Form 1040 using Form 5695.
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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.
