Have you gotten a call from the Solar Tax Association?
We’ve gotten a number of calls from our customers asking about a group called the Solar Tax Association. They are promising to file for additional rebates, incentives and solar tax credits for solar customers. Once they get you on the phone, they send over an email with that they are pitching.
Who Are We?
The Solar Tax Association (SolarTaxAssociation.org) is one of five accounting firms nationwide who are members of The Solar Energy Industry Association (SEIA.org). We have offices and divisions located in many different states, however our main accounting firm has a B+ Rating with the Better Business Bureau and has been in business over 12 years. You can see this at Strategic Tax Services BBB.
Why Is This Consultation Provided?
The reason The Solar Tax Association provides the session is we see that the average homeowner will miss between 3-4 tax incentives for their solar panel equipment.
Most families will only claim the 30% Federal ITC and any applicable State Credit.
However, if you visit the Database of State Incentives for Renewables and Efficiency (www.dsireusa.org) you will see that most states have anywhere from 40 to over 250 policies and incentives on Solar Panel Systems and Clean Energy Production.
When we go through and do an analysis of your system against all available incentives, I will often be able to identify thousands of additional dollars owed to you. In about 25% of cases, clients are able to write off between 60-85% of the total system purchase price.
In NV, there are NO additional incentives for solar on a residential home beyond the federal solar tax credit and the NV Energy rebate (if applicable.) Robco has already filed for your NV Energy rebate at installation (if you choose to take it) and you have already claimed your federal tax credit on your own tax return.
It looks like this company is proposing that you as an individual can use a business deduction called MACRS to claim an additional tax benefit for solar.
Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover investments in certain property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. A number of renewable energy technologies are classified as five-year property (26 USC § 168(e)(3)(B)(vi)) under the MACRS, which refers to 26 USC § 48(a)(3)(A), often known as the energy investment tax credit or ITC to define eligible property.
MACRS seems to be a businesses only tax deduction. However, we are not tax planners. To clear things up, we reached out to a professional tax preparer for his opinion on this idea of you being a “business” for the purpose of solar.
“This screams scam for obvious reasons. From a tax perspective, I like to go back to the basics.
- For the IRS to accept that an activity is a business, there must be a profit motive, at a minimum. Never going to successfully argue that point here on a solar system on a residential home… Guaranteed to lose this battle in an audit and/or tax court.
- Depreciation sounds like a good thing. However, there is a thing called depreciation recapture. This comes into play when the depreciated asset is sold. It requires that the gain attributed to depreciation be claimed as income in the year of sale. So, for example, if the asset is sold for a gain of $100,000 and the accumulated depreciation taken by the owner in the past was $60,000, then only $40,000 gets the beneficial tax treatment of capital gain. The other $60,000 is reported as current income. That could be very bad depending on how much reportable income there is for the year. Since only business-use assets can be depreciated, it adds another issue (see 3 below).
- The capital gains deduction you could get on a primary home sale ($250,000 for single or $500,000 for married) is NOT allowed for a business asset. This would be at risk if the homeowner is claiming some sort of business. (This deduction requires that the homeowner live in the home for two years out of the last five.)
Bottom line: My professional opinion is to stay far away from this as it results in more risks then it does tax benefits or actual savings. There are many other legitimate ways to plan for lower taxes that are proven, legal, and relatively common. “
Ask you own tax professional, first.
If you are contacted by the Solar Tax Association (or anyone else offering to help you with claiming additional incentives on your system) or if you have any questions about how solar could impact your taxes, please reach out to Ron or to your own tax planner before you make any commitments or sign anything.
Ron’s contact info is below.