Exactly. Personally I’m pretty risk adverse when it comes to pushing the line with the IRS, but I agree 100%. Is it likely that one would get audited? No, but based on the language I don’t think that the IRS would share the same view that the credit would apply to that total balance.
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Master Thread: Energy products and Tax discussions
- Thread starter jjrandorin
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So, if wrong, and get caught, you pay the taxes and maybe a penalty. The key, IMO, is to have a tax person do, sign, and send in the taxes
ucmndd
Well-Known Member
This does not shield you of personal liability to the degree you might expect. The IRS will come after YOU, the taxpayer, for any underpaid taxes in any case. Whether or not you can press that case yourself and hold your preparer liable will be a discussion (or litigation) between you and them.
If you just give a tax preparer an un-itemized invoice for a solar roof and say "I want my 26%" I think it would be at minimum an uphill battle to show that they were negligent or fraudulent in their preparation to the point of bearing financial liability.
jrweiss98020
Tessa's Tesla
There are likely as many auditors', CPAs', and lawyers' opinions as there are auditors, CPAs, and lawyers. There can be no final answer until someone takes it to court and the court renders a decision.
IMO, the nonactive shingles are an integral part of the Solar Roof design, and are therefore eligible. An analog is that a circuit breaker panel that must be upgraded during a solar install does not directly produce solar energy, but is allowed as part of the total installation cost.
IMO, the nonactive shingles are an integral part of the Solar Roof design, and are therefore eligible. An analog is that a circuit breaker panel that must be upgraded during a solar install does not directly produce solar energy, but is allowed as part of the total installation cost.
ucmndd
Well-Known Member
Good luck with that.
I put on a new roof before installing solar panels. Why aren’t the shingles on my north facing roof planes 50 feet away from the energy producing panels eligible for the tax credit?
That’s an actual analog, not a circuit breaker that is actually required for the flow of energy.
Not sure if you saw my response to your other post, but how do you square that with the text from your link that:
“Components such as a roof's decking or rafters that serve only a roofing or structural function do not qualify for the credit.”
Do non active tiles serve a non-structural/non-roofing purpose? At the very least, the waterproof membrane/underlayment and whatever flashing is done shouldn’t be counted for the credit. But since those don’t seem to be split out either, I think that strengthens the case that just taking a percentage of the total doesn’t meet the IRS rules.
RKCRLR
Active Member
I currently have solar that I took the ITC for and 2 Powerwalls that I didn't take the ITC for. I'm considering adding a 3rd Powerwall and taking the ITC for it.
My understanding is the Powerwalls need to pretty much be charged 100% by solar to be eligible for the ITC. Currently, Tesla doesn't allow grid charging when you have solar (with some rare exceptions) but that may change. My understanding is you can't direct only 2 of the 3 Powerwalls to be charged from the grid.
If I limit the grid charging of the 3 Powerwalls to only 67% of total capacity would that met the ITC requirements?
My understanding is the Powerwalls need to pretty much be charged 100% by solar to be eligible for the ITC. Currently, Tesla doesn't allow grid charging when you have solar (with some rare exceptions) but that may change. My understanding is you can't direct only 2 of the 3 Powerwalls to be charged from the grid.
If I limit the grid charging of the 3 Powerwalls to only 67% of total capacity would that met the ITC requirements?
You have solar tied PWs that also charge from the grid!? That’s unicorn status from what I’ve read. I have no idea on the tax side of things, but I am sure that there are a bunch of people who are interested in how you managed to get both solar and grid charging powerwalls in the US.
RKCRLR
Active Member
Currently, my Powerwalls only charge from the grid during StormWatch. There have been a few people that have solar and charge Powerwalls from the grid but as you say that is rare. But Tesla may allow charging from the grid when you have solar in the future. Who knows what draconian measures will finally come with NEM3 and the workarounds Tesla will put in place.
ucmndd
Well-Known Member
Right? The idea of claiming a tax credit on non-solar roof tiles is so obviously against the spirit and intent (and also to my reading, the terms) of the ITC that it kinda amazes me how far people will go to contort their reasoning and feel justified in what’s basically fraud.
Taking things to the logical extreme, let’s say I install a 1kw solar roof on my 10,000 square foot mansion. The idea that the government should reimburse me 26% for my entire roof is absurd.
Jrweiss is correct about one thing, it will take some publicized audits and decision memos from the IRS to make things crystal clear given this emerging market of products. Though I have to think that claiming a 6 figure ITC will no doubt raise audit flags and provide the government with their sacrificial lamb soon enough.
I agree, typically only the portion that is strictly generating renewable electricity was supposed to be eligible for the ITC. The grey area comes in to play that the costs to enable the renewable energy project are also eligible for the ITC. This includes code compliance (eg disconnects and permitting), wiring, racking, flashing, direct labor costs, the installer's overhead, etc.
So, just playing devil's advocate for a second... if a homeowner needs to get a new main service panel (MSP) to have their new solar + ESS functional per code, would you consider that marginal cost of the MSP to be a green/solar equipment and therefore that cost is eligible for the ITC?
If the answer is "yes, the MSP is part of the solar project"*.... then is it that big of a stretch for someone to rationalize that the entire roof replacement (regardless of active tiles or not) is enabling the solar generation project? After all, you cannot simply install the active tiles of a Tesla Solar Roof without all the other bits.
If the answer is "no, the MSP is not part of the solar array".... then all solar-customers would need their solar installers to provide an itemized invoice or bill of material isolating the costs of items like a MSP, breakers, gutter boxes, disconnects, etc. So the homeowner doesn't claim a 26% on the items they feel do not actively generate power.
If the answer is "it depends" then who becomes the arbiter to determine each unique case? Shouldn't homeowners simply claim the most possible from their own point of view, and have the IRS come back with their own assessment if the IRS deems the homeowner is incorrectly claiming value under the renewables ITC?
* PS: if a homeowner believes the MSP is part of the solar project to be eligible for the ITC, then PG&E could be technically correct that their like-for-like provision for safety clearance to a gas riser will not apply towards the MSP. Because then the MSP is part of the solar project, and could mean the main service panel is not part of like-for-like.
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Based on the fact that energy storage systems are also covered under the ITC, it’s not just generation equipment. I would (and will) argue that equipment required for the generation, transmission, distribution, and storage of solar power based on your existing electrical system and the applicable building/electrical codes is what is eligible. DL and overhead aren’t ineligible as there’s nothing that says that installers can’t profit on the work performed/have to do it for free. Flashing is the only item you list above that I think wouldn’t be included since the IRS is clear that items serving only a roofing function aren’t eligible (as I’ve quoted a few times).
Yes, as it permits the transmission/distribution of solar power into the home/grid
Yes, because excluding that guy who found out he has electrified gutters after getting a solar roof, the inactive tiles/rest of the roofing products do not facilitate the movement of solar power from the PV array to the home. Going back to traditional PV panels, let’s say that someone had a thatch roof where panels couldn’t be installed, do they get to take the ITC on a full re-roof? Or a roof structure that wouldn’t hold up under the weight/stress of a PV array, so they have to replace/sister/whatever all the rafters, would all that expense be covered because it’s enabling the solar array? Based on what I’ve read on the subject, I’d say no to both cases as they would fail the roofing/structural portion of the IRS guidelines. Inactive solar tiles fall into this category as well. The full paragraph quoted by @ucmndd shows the distinction between something that serves only as roofing (ineligible) or something that serves a dual purpose of roofing and solar collection (eligible).
I'm going to preface this with a key point. I don't know what a Tesla Solar Roof invoice looks like. If there's a line item for "solar + ess" and a separate line item for "definitely roofing only and not ITC eligible" then I think a homeowner would be remiss to take the following simpleton mindset I'm about to lay out.
But if Tesla is simply billing for a "solar roof" ... I think you should consider the the Tesla Solar Roof product holistically instead of being an expert who is decomposing the entire project into its pieces. The Tesla Solar Roof is marketed and sold to consumers as a single product that does two things. It is a dual purpose roofing + solar collection.
If the product does both, it could be entirely eligible as perceived by my simpleton mindset of what "product" is being purchased.
Look, I actually agree with your interpretation. If I personally got a Tesla solar roof, I would disaggregate the purchase into a solar + ESS portion and a roofing portion. And I would expect Tesla to break the pieces up on the invoice. So I personally would only claim the solar + ESS portion for the federal ITC. But I'm also a risk adverse person who typically operates well within the spirit/intent of rules rather than being on the edge of them.
I feel like the onus here is on Tesla Energy. If they were doing this within the spirit of the ITC, they'd be breaking up the Solar Roof purchase into the eligible and non-eligible pieces and telling customers the portion they should be claiming for the ITC. When I bought a solar-powered attic fan, the installer sent an invoice that had in a bright yellow box explaining the portion of the BOM that was actually related to the solar-powered aspect of the attic fan. And that was the amount to use for the ITC. I feel like that's the way it should be handled by Tesla, instead of having people asking about it on some web forum.
ucmndd
Well-Known Member
Let me start by saying I understand and agree with your points that everything is not perfectly black and white, like so many things in the tax code. If I were king and sole decider of all the things right and just, I would say yes, a new MSP would fall under the spirit and intent of the ITC, as it's a meaningful upgrade to the electrical system of the home that directly enables the installation and production of clean energy.
I don't think you can make that same argument for "an entire new roof" without some serious mental contortion, even if "it's all a system" and you can't install one part without another (particularly given the wide availability of economical alternatives like conventional roof or ground mount panels, etc). In my role of king and sole deciders of all the things right and just, I would say "request denied" to non-solar roofing tiles.
willow_hiller
Well-Known Member
I've got a fun tax topic to discuss: SREC income.
I've already convinced myself that because I claimed the full cost of my solar system in the federal solar tax credit, money I collect from selling SRECs is taxable income (in theory, you can claim the SRECs are offsetting the initial investment in solar, but that would cause the basis to decrease over time, and might require an amended return for the solar tax credit every year, but that's another topic).
So the question I wanted to ask was: how is SREC income legally classified? TurboTax thinks because it was done with the intent to earn money and occurs every year, it's a form of self-employment that requires additional self-employment taxes. It's definitely not "employment," so I manually overrode the self-employment taxes. But will the IRS be happy with me just filing it as a 1099-MISC every year?
I've already convinced myself that because I claimed the full cost of my solar system in the federal solar tax credit, money I collect from selling SRECs is taxable income (in theory, you can claim the SRECs are offsetting the initial investment in solar, but that would cause the basis to decrease over time, and might require an amended return for the solar tax credit every year, but that's another topic).
So the question I wanted to ask was: how is SREC income legally classified? TurboTax thinks because it was done with the intent to earn money and occurs every year, it's a form of self-employment that requires additional self-employment taxes. It's definitely not "employment," so I manually overrode the self-employment taxes. But will the IRS be happy with me just filing it as a 1099-MISC every year?
It's too bad homeowners cannot depreciate their solar array (the portion not subsidized by the ITC) to create tax deductible expenses each year to offset income or stuff like the SREC.
On my 2020 solar roof contract, Tesla did have separate line items for PV tiles and for non-PV tiles.
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