Let's start out with the disclaimer that you must rely on your trusted Tax Professional. They will be the one answering an audit questions, not us. But also be aware, I suggest even if you are farming your taxes out that you read through this and try to Grok it. All the forms and instructions are at the bottom.
HINT: Don't let your eyes glaze over, there is a lot of information here, but I have put it into a really actionable format. It's not that hard, except for the Hawaii N-342 claim for multiple system based on wattage, and that is only when you are trying to claim for than $5000 in this year. Hawaii provides the calculator online to properly fill this form, and most likely your accountant can do it. It's totally not intuitive, but the formula works.
I want to start out with a major change: The Feds had a decades old policy on energy efficiency for insulation, air-conditioning, capped it at $600 total per property, per lifetime of the property, this was pretty sad and annoying. Well they just changed it. And now it is 30% of total cost, up to $1200 per year. Big thing for efficient Air-conditioning, and esp. PV Air-Conditioning.
FED FORMS
If you do your own taxes, and this blog post doesn't get you to to the finish line on the Hawaii N-342, I can charge you $150 to do the form for you, and you will remain responsible for it since we are not licensed tax accountants.
It can be an advantage to split your credit claim into 2 different years if the contracts or work really did happen in 2 different years....it makes it less likely that they will delay payment or audit you if you are submitting a smaller number in any particular year.
If your tax person makes a mistake it can do:
1) Get you less than you deserve
2) Get you audited if they fill out the forms wrong, or especially if they don't use the Calculator on Page 2 of the Form N-342 (revised 2023) for your State Hawaii return, and turn in the number of forms N-342 that you need to get the maximum benefit. The number of N-342 forms shall be dictated by the size of your PV system in total wattage (they actually want kilo-watts or 1000 Watts). You must know the Wattage, it may be listed on your proposal or Quickbooks statement, if not ASK us.
It took me a few hours to bone up on the Tax Credit forms for Federal and State, since I had not done so for years. I also had to spend hours with my personal and business expert tax preparer to figure out how to claim on a Solar PV Air-conditioning system for myself (Hint it gets broken into 2 pieces, the PV array, and then the air-conditioner itself.. I also did another Large PV Aircon in 2023.
A close look at the annotations below and if need be, a call to Steve should clear up how to handle the tax credits on: But please send the link to this page to your tax person and read the instructions through to, then if you are stuck, call Steve.
1) Solar PV Air Conditioning
2) Solar PV Electric Power
3) Solar Integrated with Battery Storage
4) Solar Attic Fan
5) Solar Hot Water
Its 9:30 PM so I am going to post this up now and add more later
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Here is the latest N-342 for 2023 -- They did update it in 2023, only the instructions, the N-342 is exactly the same as in 2020.
Hawaii Instructions N-342. The Hawaii credit is better than the Federal Credit, but is more complicated.
https://files.hawaii.gov/tax/forms/2023/n342ins.pdf
Hawaii Form N-342
https://files.hawaii.gov/tax/forms/2020/n342_i.pdf
Federal Instructions for 5695
https://www.irs.gov/pub/irs-pdf/i5695.pdf
Federal Form 5695
https://www.irs.gov/pub/irs-pdf/f5695.pdf
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