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Master Thread: Energy products and Tax discussions

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The key phrase here is "by a public utility." As @willow_hiller mentioned, in MD, the grant/rebate is issued from the state, which means it is taxable but does not reduce the ITC credit amount. Interestingly, MD also has a tax credit (not a grant/rebate) for storage, which has yet different federal tax treatment. But, for SGIP, it seems like it would turn on whether the subsidy is really a state subsidy or a utility subsidy, and I do not know enough to say, since it sounds like a state program administered by the utilities. In any case, it does seem odd there is an option to file as tax exempt that would be applicable to anybody other than a non-profit - I would think it would either be taxable for every homeowner or none.

I guess the only other question is what is an "energy conservation measure" since I understand SGIP includes programs for people with medical needs, which might not really be an energy conservation measure, while other programs require recipients to conserve/support the grid. But, I would still think the specific program applied for would define the tax status and not an election by the customer.
I agree if an incentive is not paid by an utility then it is likely taxable (unless that is addressed somewhere else in the code). But SGIP is funded by utility ratepayers, is administered by the utilities, and the check comes from the utility. To me, that meets both the wording and intent of the code as being non-taxable as gross income.
One of the conditions of the SGIP incentive is the batteries get cycled the equivalent of 52 full discharge cycles to the grid per year. Doing this reduces peak demand on the grid which reduces the utilities' need to bring on less efficient power sources. To me, this meets the definition of an "energy conservation measure".
 
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I agree if an incentive is not paid by an utility then it is likely taxable (unless that is addressed somewhere else in the code). But SGIP is funded by utility ratepayers, is administered by the utilities, and the check comes from the utility. To me, that meets both the wording and intent of the code as being non-taxable as gross income.
One of the conditions of the SGIP incentive is the batteries get cycled the equivalent of 52 full discharge cycles to the grid per year. Doing this reduces peak demand on the grid which reduces the utilities' need to bring on less efficient power sources. To me, this meets the definition of an "energy conservation measure".
That all sounds reasonable to me. The interesting thing is that for most taxpayers (those with taxable under ~$161k for singles/$321k married filing jointly,) it is potentially better if it is taxable at the federal level, because the marginal rate is 24% or less. Where, if it is non-taxable, you lose the 26% because it has to be reduced from the basis of the ITC claim.

I do say potentially, only because it assumes the same state tax treatment. In MD, the solar grant is not taxable at the state level, so the question of which is better is only about comparing one's marginal tax rate to the 26% ITC. If the SGIP taxable/tax-exempt option also affects state tax treatment, then that can change which is better.
 
It was 3 years ago, but I did get a 1099 from PG&E, and I included a note with my tax return indicating that it was not taxable income since it came from a utility, citing the relevant section of the IRS code. But then for the ITC I reduced my cost for the system accordingly.

Cheers, Wayne
 
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Tesla has been erroneously charging sales tax in MA for the powerwall portion of solar systems. @TORQU3 and I have found that the state considers powerwalls part of the solar system and therefore exempt from sales tax. If you’ve paid sales tax on your MA solar system you should contact Tesla for a refund. If you are getting a system installed in the future, make sure there is no MA sales tax added. I just got my sales tax refund.
 
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By the way, perhaps to soften the blow of the massive price increase, my Tesla Energy project manager told me that some customers are planning (supposedly on the advice of their accountants) to apply the federal tax credit to the entire cost of their solar roof project, not just the solar portion. She said Tesla's advice was just to apply the tax credit to the solar portion. Has anyone talked with a tax expert about this? I am guessing the IRS would frown upon this move and you would be asking for an audit.
 
By the way, perhaps to soften the blow of the massive price increase, my Tesla Energy project manager told me that some customers are planning (supposedly on the advice of their accountants) to apply the federal tax credit to the entire cost of their solar roof project, not just the solar portion. She said Tesla's advice was just to apply the tax credit to the solar portion. Has anyone talked with a tax expert about this? I am guessing the IRS would frown upon this move and you would be asking for an audit.

(moderator note: Moved to the tax discussions sticky thread)
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IRS probably would frown on this since the entire roof is not deductible. You can read more about TMC members opinion on tax implications for PV including solar roof in this thread I moved your post to. The first post in this thread has some historical tax thread links in it, and ongoing discussion on tax implications are also in this thread.
 
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(moderator note: Moved to the tax discussions sticky thread)
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IRS probably would frown on this since the entire roof is not deductible. You can read more about TMC members opinion on tax implications for PV including solar roof in this thread I moved your post to. The first post in this thread has some historical tax thread links in it, and ongoing discussion on tax implications are also in this thread.
I would agree - unless you get your tax advisor to back up this "advice" from the Tesla employee, it could be problematic if the IRS were to investigate.

I would also note that either this advisor has gone a bit rogue and/or Tesla could face some issues if their employees are offering this "advice." And, given that their officially-not-tax-advice tax advice that is included in the contract suggests only deducting the solar portion, I suspect Tesla would disavow any claims (which I'm guessing are not in writing) that customers were advised they could claim the entire amount. And I certainly hope this is a rogue employee and not something encouraged by management, because inflating rebates/credits to get you to buy is another tactic you will see in shadier companies.

I do think there might - and I emphasize might - be some wiggle room for claiming some of the costs Tesla does not include. It appears things like permitting fees could be deductible, and the biggest stretch might be to try and claim a portion of the per sq. ft. cost equal to the portion covered by solar tiles. In either case, it would definitely make sense to talk to a tax expert, and also to recognize that a nice feature of claiming what Tesla suggests is that it is probably easier to defend in the event of an audit.
 
I would agree - unless you get your tax advisor to back up this "advice" from the Tesla employee, it could be problematic if the IRS were to investigate.

I would also note that either this advisor has gone a bit rogue and/or Tesla could face some issues if their employees are offering this "advice." And, given that their officially-not-tax-advice tax advice that is included in the contract suggests only deducting the solar portion, I suspect Tesla would disavow any claims (which I'm guessing are not in writing) that customers were advised they could claim the entire amount. And I certainly hope this is a rogue employee and not something encouraged by management, because inflating rebates/credits to get you to buy is another tactic you will see in shadier companies.

I do think there might - and I emphasize might - be some wiggle room for claiming some of the costs Tesla does not include. It appears things like permitting fees could be deductible, and the biggest stretch might be to try and claim a portion of the per sq. ft. cost equal to the portion covered by solar tiles. In either case, it would definitely make sense to talk to a tax expert, and also to recognize that a nice feature of claiming what Tesla suggests is that it is probably easier to defend in the event of an audit.

I think what @sportser002 is saying is a bit different than you read it, at least in my opinion. I think they were saying that their tesla rep said:

"I have heard that some customers plan to take the tax credit for the entire roof. Teslas position is to take the tax credit for only the solar portion".

Thats how I read it, but maybe I read it incorrectly?
 
I think what @sportser002 is saying is a bit different than you read it, at least in my opinion. I think they were saying that their tesla rep said:

"I have heard that some customers plan to take the tax credit for the entire roof. Teslas position is to take the tax credit for only the solar portion".

Thats how I read it, but maybe I read it incorrectly?
Yes, that is how I read it, but even so that sounds a bit like a "wink, wink" situation where you announce the official line and then let the person know a way to get around it. I know if I ever gave advice as part of my work it would be a big issue to even mention the possibility of circumventing the official position as it could still come back on us, and the employee in this case should never have even mentioned the possibility of making a larger claim than Tesla suggests.
 
If I recently got solar and trim a few trees to improve production, can I claim 26% fed rebate on the amount spent?
Simple answer is no. Trees are not part of a solar energy system as defined by the IRS. See 26 U.S. Code § 25D - Residential energy efficient property:

(2) Qualified solar electric property expenditure
The term “qualified solar electric property expenditure” means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer

Just because it helps make your system perform better does not mean it qualifies for the credit.
 

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