Tax Resources for 2019 -- Fed 5695 Hawaii 342

As always, we are not your tax accountant nor your lawyer.    Please independently verify all information and interpretations.   Keep in mind that in 2020 the Fed tax credit has been reduced from 30% to 26%.    And in 2021 it goes down to 22%.    And 2022 ---- ZERO!

So if you are looking any type of solar upgrade or modernization, you should do it this year.

This is the Federal Tax form 5695 most people will use.   And the Instructions.

https://www.irs.gov/pub/irs-pdf/f5695.pdf 

This is the State Tax form N342.   And the Instructions.

https://files.hawaii.gov/tax/forms/2019/n342_i.pdf

Many home owners are looking to upgrade from "legacy" inverters and micro-inverters that will never be capable of integrating with a battery system, to the newer types and the one we like the best is the Enphase IQ7 series that were designed from the get-go to be an integrated part of a battery system.     We call this the IQ7 Upgrade.

Note -- They can function on their own as a "qualified solar electric property expenditure"

Of particular interest for homeowners interested in at some point installing a battery, the IRS has
clarified that Batteries Charged by Solar Electric, including all the devices necessary to connect them into the house's electrical system, will be considered a "Qualified solar electric property expenditure".

https://www.irs.gov/pub/irs-wd/201809003.pdf

https://law.justia.com/codes/us/2006/title26/subtitlea/chap1/subchapa/partiv/subparta/sec25d

https://law.justia.com/codes/us/2006/title26/subtitlea/chap1/subchapa/partiv/subparta/sec25d

This clarification letter from the IRS is from 2013, so it doesn't necessarily set precedent (or deny precedent) since so much has changed, but does at least give a little impression of the way the IRS thinks and may view things even though there has been a sea change in solar technology since then.

https://www.irs.gov/pub/irs-drop/n-13-70.pdf

Section 48 deals with Business Energy Investment Tax Credits

If you do business from your house, it may be possible to get additional benefits by allocating a portion of your solar electric (or even the solar hot water) to the business.     The portion allocated to business can then be depreciated, providing even more tax benefits.

Of course, this complicates the taxes and for many people it may not be worth the complication.

This IRS Notice clarifies the Business Tax Credits.

https://rsmus.com/what-we-do/services/tax/credits-and-incentives/investment-incentives/irs-issues-guidance-on-section-48-energy-investment-tax-credit.html

And for those with too much time on their hands, here is the Hawaii actual laws that describe the solar tax credits.

https://www.capitol.hawaii.gov/hrscurrent/Vol04_Ch0201-0257/HRS0235/HRS_0235-0012_0005.htm