TAX CREDIT

[Yianie123.]

I will be installing 1400W solar panel system at my home and I am confused on the TAX Credit.  I know that you can get 30% of your cost returned on your tax refund, which includes labor and material.  But what happens if you do your own labor?  I know it sound like the answer would be no, but I did call the IRS and after some code research, there is no definite answer and the IRS rep. said finally that you can charge time for your labor.  Does anyone know anything about this?

[defed]

i can't answer your question, but i'm not going to claim (never even considered it actually) anything additional for my time.  i'll be happy to get back the 30% on what i bought and have receipts for w/o getting audited!

[Yianie123.]

How large is your system?
John

[Rover]

I'm no tax attorney/CPA...but

I'd get it in writting. Also wonder if in some misconstrued way it could be considered self-employment, would you then be responsible for the self employment tax on those wages ...you didn't earn yet claim

I know sounds weird... can't see it happening but .... get it in writting (or see a tax attorney, CPA, whatever that will stand behind it)

[Rover]

...small addition.. and how much do you claim in labor?.
Are you an professional that makes 250$ and hour.. do you claim that, do you claim what it might have cost based on bids?

I see ugliness in this 

[defed]

i bought 700w of panels and an mppt controller.  there are some things i'm not going to bother to claim...i made a temporary ground rack (future pole mount w/ tracker) and battery box.  probably won't bother claiming those.  but all of the breaker boxes, fuses, wiring supplies, batteries...i am going to claim.

i believe the credit only reduces your tax obligations.  they way i understand it, in a normal tax situation, if your tax obligation is $5k, and you paid in $8k...you get a $3k tax refund.  now, if you claim $10k in solar, you would be eligible for $3k (30%) in extra refund.  you can't get back more than you paid in.  so in this example, you would get your regular $3k back plus the $3k for your credit.  in other words, if you paid in $8k, you won't get any more than that back no matter what your solar credit is.  you would have to carry your extra over to additional tax yrs.

i am not a tax professional, and it's been a cpl months since i read the rules, so i could have a few things wrong!  

[ghurd]

I see ugliness in this 

Me too.
(I'm no tax attorney/CPA either)

Can not claim it without a receipt, so you simply write up a receipt for labor?  Writing a receipt is a whole can of worms by itself.
Off the top of my head:
Are you leagally able to do electrical work in your locality?  Some places require all sorts of things, from being bonded, licensed, and insured, to being in the electrical union.
Did you charge sales tax?  Many states (mine) now require sales tax be charged on labor.  Charging someone for labor and not collecting the sales tax is big time serious bad mojo.
Do you have the licenses required to collect sales tax?  Because that is required to charge sales tax, which is required to be charging anyone for labor.

Get the wrong guy PO'd, and they may come after you for anything from doing illegal electrical work, to not having commercial vehical insurance, to not having commercial plates on your truck when you went to the local hardware store for a lock washer.  (I have heard horror storys like that)
G-

[Yianie123.]

Thank you everyone for all of your input.  I am not an electrician, but I am a degreed engineer, and have been managing multimillion dollar projects for twenty years.  I do see everyone point.  It doesn't seem fair that if I hire someone do to the work, or I do the work myself for exactly the same system, in one case I get a refund, and in the other I get nothing but sweat.  I guess I will contact a CPA.

[SteveCH]

I am not sure what the big deal is here. If you do the work yourself, you are paying out zero labor. Yes, yes, I realize you may consider your time worth money. On the other hand, you paid out no cash but want cash back from the fed's. I don't blame you, I'd like it, too. But you are still ahead in the game. You are paying out...nothing. I like to do everything myself. Just the way I am. I built this house in which I live with zero assistance, no way I'm gonna go hire someone to add some more solar panels to my array. Even if I could claim their labor charge on my IRS filing.

And we are fortunate in a way with PV credits. Some of the credits require the system be professionally installed and that we must prove it was. I think, but am not certain, that one case is with solar water heating systems. Maybe not, but there were some I saw where that applied. A friend tells me that he is replacing his central heating system with an Energy Star certified one, expecting the credits also, and his is required to be installed by certified pro's.

A buddy of mine who is a CPA says, well, we can claim and deduct anything we are willing to sit across from a couple of hard-core IRS agents during an audit and defend. I don't know, I have never claimed my labor. But I have no philosophical opposition to anyone doing so.

[WindriderNM]

I'm not sure but I think to get the credits the work needs to be done by a licensed contractor.

[defed]

i do not believe that to be true for the federal 30%.  for some, you do...like in NY, NYSERDA rebates are paid to the installer who is required to pass the savings to you.

[Yianie123.]

Defed, I'm a little confused.  Do you believe that someone who does there own installation deserves monetary compensation?

[defed]

i thought (maybe incorrectly) that windrider was saying that to get ANY credits, the system had to be installed professionally.  in some cases (like NYSERDA in NY) this is true.  but for the federal, i think you can buy your own equipment, install it yourself, then claim credit for the items purchased.  i don't know anything in regards to paying yourself for labor, but if you had paid a contractor to install it, you can claim that on your federal return.

[GaryGary]

Hi,
You can't claim your own labor as part of the cost of the system that qualifies for the rebate -- see below.

You can do the system yourself and qualify for the federal 30% rebate (I did).  You basically have to get an electrical permit, meet the regular codes, and buy panels and inverter that have the UL approval -- all easy to do.
http://www.builditsolar.com/Projects/PV/EnphasePV/Main.htm

Some states have programs that might require that a professional install the the system, but only some.  In MT where my system is, I still qualified for the state rebate program, but did qualify for the utility sponsored program because it required that the installer be on an approved list.


This site has a good summary of the rules:
http://www.energystar.gov/index.cfm?c=tax_credits.tx_index


One part reads:
"PV system Requirements

At least half of the energy generated by the "qualifying property" must come from the sun. The system must be certified by the Solar Rating and Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.

Note: The credit is not available for expenses for swimming pools or hot tubs. The water must be used in the dwelling.

Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement.

Tax Credit includes installation costs."

In the FAQs on the same site, this is the answer to "Can I install it myself"
Frequent Questions    
Frequent Questions > Tax Credits/ Rebates/ Financing/ Grants >
Can I do the install myself for the tax credit?

    Yes, you can install the eligible product yourself, you are not required to have a particular contractor do the install.

    Many of the energy efficiency tax credits allow the cost of installation/labor to be included in the eligible amount (view this FAQ for details). However, if you install the product on your own, you can not claim a labor charge for the installation. There is no basis for which to charge the government for your time.

Gary