Federal Tax Credit for Solar on Boat

I am getting ready to install two 385 watt solar panels on my Nordic Tug to minimize genset run time and will be investing around $2000 dollars by the time I add in a charge controller, mounting frame,cabling, fuses, etc. The other possible project will be changing out my 880 Ahr Lifeline AGM house bank which is now in its 12th season and is probably getting close to EOL although we had no real issues last season. If this goes ahead, I will likely upgrade to a LiFePO4 house bank keeping the the existing AGM start and thruster batteries charging them from the genset/alternator and DC to DC charger.

I am fully aware of the technical aspects of upgrading to LiFeP04.

My question which only applies to US members is:

Have any members taken the allowable percentage for a boat solar installation (including batteries) as a Federal Tax Credit on their income taxes? If so, has anyone run into any issues? Since the credit is 26% for 2022, this could help defray the cost of the system. My tax guy, a non boater, seemed to think this was OK.


Any responses would be welcome. Thanks

Are you a full time live aboard? The credit is meant for your primary residence.

Reply to HTurner

I believe I am correct that the credit applies to both primary and secondary residences per www.energy.gov. A boat meeting certain criteria qualifies as a secondary residence.

Other opinions or feedback would be appreciated.

We were recently informed by our CPA that as liveaboards we would qualify for the tax credit as the boat is our primary residence. Don't know about boats as secondary residences, though.

Also I think you have to itemize to get the credit.

Senojev said:

I believe I am correct that the credit applies to both primary and secondary residences per www.energy.gov. A boat meeting certain criteria qualifies as a secondary residence.

Other opinions or feedback would be appreciated.

Click to expand...

Yes, I was wrong Secondary Residences do qualify. IRS Form 5695, https://www.irs.gov/pub/irs-pdf/f5695.pdfResidential Energy Efficient Property Credit is very easy and straight forward.

I did the credit on my previous boat and again on the current one. No issues, but there wouldn't be unless you got audited. Never had that happen.

The federal credit applies to both primary and secondary residences. Most boats owned by people on here would qualify. I claimed it on my boat last year when we installed solar, no issues. And you don't have to itemize to claim the credit. I couldn't claim the NY credit, however, as that one is only for your primary residence.



Including batteries is questionable, however. The way the federal credit is written, batteries are only eligible if they're only charged by the solar system. If the system can charge them from other sources, they don't qualify.

Solar panels, mount, change controllers, wiring can be claimed if you meet the criteria. But unless you have a very unusual boat, the batteries will NOT qualify. They only qualify if they are exclusively charged by solar, and that’s very unlikely in a typical boat. I think Inverters do qualify, but can’t recall 100%. At least this is how we handled it for 2021.

twistedtree said:

Solar panels, mount, change controllers, wiring can be claimed if you meet the criteria. But unless you have a very unusual boat, the batteries will NOT qualify. They only qualify if they are exclusively charged by solar, and that’s very unlikely in a typical boat. I think Inverters do qualify, but can’t recall 100%. At least this is how we handled it for 2021.

Click to expand...

Inverters do qualify, but your post agrees with my understanding on batteries.

rslifkin said:

Inverters do qualify, but your post agrees with my understanding on batteries.

Click to expand...

Thanks. I couldn’t remember about the inverters. Of course most of the $$ is in the batteries and they don’t qualify.

I have done FOUR solar / battery systems and have always gotten credit for the batteries as well.

And then there is this---
"Battery systems that are charged by a renewable energy system more than 75% of the time are eligible for the ITC." Obviously the batteries are entirely or even primarily charged by the solar panels on your boat so yes you would definitely get the tax credit for the battery expense as well.

Zoar said:

I have done FOUR solar / battery systems and have always gotten credit for the batteries as well.

And then there is this---
"Battery systems that are charged by a renewable energy system more than 75% of the time are eligible for the ITC." Obviously the batteries are entirely or even primarily charged by the solar panels on your boat so yes you would definitely get the tax credit for the battery expense as well.

Click to expand...

Where do you see that? I think that may have previously been the rule, but I’m pretty sure it isn’t anymore.

Zoar said:

I have done FOUR solar / battery systems and have always gotten credit for the batteries as well.

And then there is this---
"Battery systems that are charged by a renewable energy system more than 75% of the time are eligible for the ITC." Obviously the batteries are entirely or even primarily charged by the solar panels on your boat so yes you would definitely get the tax credit for the battery expense as well.

Click to expand...

I remember seeing that 75% wording related to a commercial solar tax credit. But the residential solar tax credit states "Energy storage devices that are charged exclusively by the associated solar PV panels". So if the system is equipped to charge the batteries from any other source, the batteries don't count.

Could one include the batteries in the build as part of a "solar generator," solely charged by the panels, that at a later date be reconfigured? Nothing states that what is installed cannot be upgraded or changed.

rslifkin said:

I remember seeing that 75% wording related to a commercial solar tax credit. But the residential solar tax credit states "Energy storage devices that are charged exclusively by the associated solar PV panels". So if the system is equipped to charge the batteries from any other source, the batteries don't count.

Click to expand...

It is not just commercial. As I stated I have done four solar systems with batteries, 2 residential, one for my food truck that ALSO powers an off grid home, and for my boat. My accountant who has a focus and expertise on handling taxes for people with solar systems has always gotten my credit on my NON-commericial installation's batteries.

Zoar said:

It is not just commercial. As I stated I have done four solar systems with batteries, 2 residential, one for my food truck that ALSO powers an off grid home, and for my boat. My accountant who has a focus and expertise on handling taxes for people with solar systems has always gotten my credit on my NON-commericial installation's batteries.

Click to expand...

Interesting. I took the wording from here: https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics

If there is any kind of gray area or intepretaion in the wording, I would take the credit. There is nothing preventing you from taking the credit and as others said, unless you get audited, the credit is yours to keep.

One way of looking at is the fact that you're going to spend the money anyway on the solar system, including the batteries, so you might as well take the tax credit for the whole shebang. The odds are very good that it will sail right through with no problems. But, on the off chance it is questioned by the IRS and ultimately disallowed, at worst you'll have to pay a penalty and interest on the amount that was disallowed. Yes, there is some risk, but in this case, the reward far outweighs that risk unless you've been audited several times in the past and/or have a boat load of other questionable exemptions that would set off a red flag in the IRS computer. I'd certainly go for it if it were me.

I agree with Mojo. He said it better than I was trying to in my previous post.

Can the credit include the cost of installation? I did most of the work myself, but invested in a few hours of an electricians time to check
my work and finish the hookup.

Daysailj said:

Can the credit include the cost of installation? I did most of the work myself, but invested in a few hours of an electricians time to check
my work and finish the hookup.

Click to expand...

If the credit includes cost of installation (which I don't know if it does), I would not only include the electrician's time but also a reasonable value on your own time. Again, you can take any credit you want, it only matters if the IRS flags it and questions it. I would err in your own favor and unless the amounts or other things in you're return are unreasonable and trigger an alarm, you'll more than likely be fine.

Can the credit include the cost of adding a hardtop specifically to provide a platform for the panels?

MTK said:

Can the credit include the cost of adding a hardtop specifically to provide a platform for the panels?

Click to expand...

The credit can include anything you can interpret from the language.

In my case the hardtop 12K, panels, controllers, charger, inverter etc about 9K, batteries 3-6K - haven't decided which way I'm going on the batteries yet. Total credit around 6-7K.

Reply to Topic

• Per Energy.gov labor costs for installation are covered by the credit.
  
  
  
  The following expenses are included:
  
  
  
  • Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees
  • Sales Tax

Thanks to everyone for their comments. My takeaway from the responses and my research indicate that:


1) Most boats owned by TF members would meet the definition of a second home. My understanding is that if your boat has sleeping, cooking, and head facilities it would qualify as a second home.


2) Since this is a tax credit program, one does not have to itemize deductions.


3) Ancillary equipment to install and make the panel system function and monitoring equipment are a covered expense. (A 12K hardtop to mount the panels may be stretch but it is "mounting equipment")



4) Labor costs for initial installation are a covered expense.



5) Energy storage devices unless charged exclusively by the solar panels are not considered a covered expense. This seems to be a bit of a grey area with a number of responders and may present a risk if claimed. In my case, the additional panels I will be installing brings my total to 1600 watts so there is a good possibility that I could charge a lithium house bank exclusively using solar particularly with the charging profile for lithium. At least I will be able to try for this summer (hopefully using my existing AGMs) and see how it goes. If it works with them, I am certain it will work with a lithium bank.


On the other hand, I can't see the IRS delving into a complex wiring system or monitoring how a house bank is actually charged. Being able to show genset run time reduction could easily support one's case if queried.


As with any IRS return, if it looks reasonable there should be no issues but make sure you can support any requested credit with documentation.

Senojev said:

• Per Energy.gov labor costs for installation are covered by the credit.
  
  
  
  The following expenses are included:
  
  
  
  • Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees
  • Sales Tax

Thanks to everyone for their comments. My takeaway from the responses and my research indicate that:


1) Most boats owned by TF members would meet the definition of a second home. My understanding is that if your boat has sleeping, cooking, and head facilities it would qualify as a second home.


2) Since this is a tax credit program, one does not have to itemize deductions.


3) Ancillary equipment to install and make the panel system function and monitoring equipment are a covered expense. (A 12K hardtop to mount the panels may be stretch but it is "mounting equipment")



4) Labor costs for initial installation are a covered expense.



5) Energy storage devices unless charged exclusively by the solar panels are not considered a covered expense. This seems to be a bit of a grey area with a number of responders and may present a risk if claimed. In my case, the additional panels I will be installing brings my total to 1600 watts so there is a good possibility that I could charge a lithium house bank exclusively using solar particularly with the charging profile for lithium. At least I will be able to try for this summer (hopefully using my existing AGMs) and see how it goes. If it works with them, I am certain it will work with a lithium bank.


On the other hand, I can't see the IRS delving into a complex wiring system or monitoring how a house bank is actually charged. Being able to show genset run time reduction could easily support one's case if queried.


As with any IRS return, if it looks reasonable there should be no issues but make sure you can support any requested credit with documentation.

Click to expand...

Thats it right there.

That portion of the rules are almost impossible to enforce.

Also the IRS has no knowledge the gear is on a boat.

Don't forget, some states also have tax credits for renewables.

Later,
Dan

As far as the hardtop is concerned, would that be any different than someone having to pour a concrete slab for the panels to be mounted to? I would say it is in the same realm.