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June 1, 2022
Question

If I REPAIRED my solar electric system for $15k, where can I input this expense?

  • June 1, 2022
  • 3 replies
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I acquired the home with a photovoltaic system already in place but after 1 year had to pay $15k to repair it.

3 replies

Employee
June 1, 2022

Repairs and maintenance costs are not eligible for the energy credit but arguably the cost may be considered a capital improvement which increases the cost basis of your home. 

June 1, 2022

if it's your residence the repair is not deductible unless you are taking a home-office deduction

for home-office deduction purposes

generally, costs that result in an improvement must be capitalized. amounts paid for any of the following need to be capitalized Reg 1.263(a)-3(d) 

1) betterment 

2) restoration

3) adaption to a new use 

for a building the improvement test is met if an expenditure results in an improvement to either:

1) the building and its structural components excluding structural components designated as a building system OR

2) any of the building systems including

... electrical systems 

 

if you want further guidance

You are asking from TT Live, for which you paid extra.

https://ttlc.intuit.com/community/expert-review/help/how-do-i-connect-with-a-tax-expert-in-turbotax-live/01/27282

 5 AM to 5 PM, PT, Monday–Friday

Employee
June 1, 2022

Did the home Seller offer any type of warranty the system?  If so, look into that.

Employee
June 1, 2022

A repair restores or maintains the system to as-is or as-was condition. Repairs are the ordinary responsibility of every property owner to keep their own stuff in good condition and there are no general or special solar tax breaks for repairs.

 

An improvement adds value to the system or extends it's useful life.  Fixing broken connections would be a repair.  Replacing the inverter or batteries because they were worn out or inefficient is probably an improvement because it extends the life of the system.

 

As I read the instructions for form 5695 and the actual law, I see the solar property credit is for improvements. It does not specify new installations only.   That means you can include the cost of improvements (but not repairs) as a tax credit on the Residential Energy Efficient Property Credit section of the deductions and credits page.  If audited, you will need to be able to show how you determined that your costs were improvements or repairs. 

 

You can also add the cost of the improvement to your cost basis for the home, which may reduce your capital gains when you sell.  However, you must reduce the cost by any federal, state or local credits that you get.

 

References:

 

"If you made energy saving improvements to more than one home that you used as a residence during 2021, enter the total of those costs on the applicable line(s) of one Form 5695."

https://www.irs.gov/pub/irs-pdf/i5695.pdf

 

"The term “qualified solar electric property expenditure” means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer."

https://www.law.cornell.edu/uscode/text/26/25D