Residential Energy Credits (IRS Form 5695)

Question

We are thinking to install a solar system on our garage in the next tax year.  Line 1 of subject form says "Qualified solar electric property costs".  We plan to replace the roof prior to installation.

Current costs I can include: Roof demo equipment and land fill costs, roof installation (materials only, self installed), solar system by contractor, and electrical panel upgrade.  Are these all "qualified costs"?

What records do I need to keep in order to account for these?

AlexO · Answer

Hello, sewbeav. That's a great question!

Within the instructions for Form 5695, the IRS states "Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed."

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

From this, it's clear that roofing that doubles as solar property qualifies, but it's not so clear on if new roof installation for solar to be situated on top of would qualify.

Thankfully, within an FAQ regarding this credit, the IRS does clarify that "In general, traditional roofing materials and structural components do not qualify for the Residential Clean Energy Property Credit because they primarily serve a roofing or structural function. However, some solar roofing tiles and solar roofing shingles serve as solar electric collectors while also performing the function of traditional roofing, serving both the functions of solar electric generation and structural support and such items qualify for the credit."

https://www.irs.gov/pub/taxpros/fs-2022-40.pdf#page=3

To account for your qualified costs, you should keep receipts of the costs along with manufacturer's certification that the solar system qualifies.

MatthewD · Answer

Hi Sewbeav,

Keep all your receipts for materials and installation costs relating to the roof and solar panels. You don't need to file those with the IRS. However, keep them with a copy of your tax return.