We in California pay a premium to live in this great state, sometimes dubbed the “Sunshine Tax.” Although not an actual tax, we have a high cost of living, and when coupled with escalating utility bills, many more families are considering having solar panels installed on their homes, in an effort to reduce or, in some cases, eliminate a portion of their electric bills. Not only may this save money on a monthly basis, one also may qualify for a “sunshine” tax credit.
Taxpayers have an opportunity to claim a Federal tax credit of 30% of the cost of installation of qualified solar electric property, solar water heaters or wind turbines, with no cap on solar equipment. The property must be purchased; it cannot be leased. The property must be placed in service by December 31, 2016. The credit is claimed on Form 5695, Residential Energy Credits, Part I, Residential Energy Efficient Property Credit. It can be claimed not only on your principal residence, but also a second or vacation home, but it must be within the United States. However, you must reduce the basis of the home by any credit allowed.
Qualifying solar electric property is simply any property that generates electricity from the solar energy to be used in a dwelling units. Most manufacturers will provide a certification statement qualifying the solar panels for the credit. It is not required that you have this manufacturer’s certification to qualify for the credit, as long as you can prove that the property has the required energy efficiency standard. However, since you can rely on this statement, and it is generally available from most manufacturers, we would recommend that you obtain this certification statement and keep with your other tax records.
To claim the credit, you must act within the next year or so. The property must be completely installed and placed in service by December 31, 2016 in order to claim the credit. If the credit is more than the tax liability, the credit is nonrefundable, but any excess is carried over to following years. In addition, the credit is not limited or phased out by the Alternative Minimum Tax.
Unfortunately, California does not offer a similar tax credit, and the rebates under the California Solar Initiative have now ended. Certain counties, such as San Diego County, may waive or reduce building permit fees for installation of qualified solar panels.
So if you’re considering installing solar equipment, enjoy the sun and the tax credits. And don’t forget to wear your sunscreen! For more information please contact us at:Len@ArinielloCPA.com.
