Can I Claim the Federal Solar Tax Credit for Roof Replacement Costs?

What is the Federal Solar Tax Credit?

The Energy Policy Act of 2005 established the investment tax credit, or ITC. It is also referred to as the federal solar tax credit.The credit was initially set to last through 2007, but it has been extended several times. Previously, it allowed homeowners a federal solar tax credit for roof replacement. This equaled 30 percent of the cost of installing a solar energy system on their home. As of 2020, the deduction dropped to 26 percent. In 2021, it will become 22 percent, and from 2022 onward, 10 percent. So, the sooner you take advantage of the opportunity, the greater the benefit.

The ITC applies to commercial buildings as well. There is no cap on the amount to be deducted.

Who is Eligible for the Federal Solar Tax Credit for Roof Replacement?

To qualify for the federal solar tax credit for roof replacement, the taxpayer must own the home or building. What not everyone realizes, however, is that you must also own the solar panels. If you lease or finance the solar panels you will not qualify for the tax benefit.

Can I Count the Cost of a Roof Replacement in Calculating the Deduction?

Although solar panels can be installed in many locations, the roof is usually the optimum spot to capture the most sunlight. Your roof must be strong enough to support the panels and have enough life left in it to be practical; after all, you don’t want to have to remove the panels in a few years for a roof replacement.

Before installing solar panels, ask a qualified, licensed roofing contractor to inspect your roof and assess its condition. If you do need to replace the roof, you will be wondering whether you can deduct a percentage of its cost on your federal taxes.

If you do need to replace your roof and are wondering if these costs count in the overall installation cost, the answer is “yes and no.” Consult with a tax professional for help in understanding your specific situation. However, take the following into consideration.

When Can You Deduct Roofing Costs?

In certain situations, you can deduct your roofing costs under the Energy Policy Act.

  • If your existing roof lacks the structural strength to support the solar panels, you may need to reinforce it with new joists or sheeting. You may be able to deduct the cost of these upgrades.
  • Another potential deduction would be specialized shingles designed to improve the efficiency of the solar panels.

Certain roofing materials, such as metal or asphalt shingles that meet Energy Star requirements, may qualify you for a 10 percent federal tax deduction. This deduction does not fall under the solar tax credit, but rather the Non-Business Energy Property Tax Credit.

Note that the tax credits mentioned above do not include installation costs. The Energy Star website provides extensive information about various federal tax credits related to energy efficiency.

First Steps Toward Saving Money with Solar Panels

Once you decide that you want to explore saving energy and money with solar panels, consult with the professionals. Seek out a reputable solar panel company that will take the time to answer your questions. Talk to your tax professional to fully understand your tax advantages. And, finally, connect with a reputable roofing company who can provide solid advice and quality work.

Contact Westfall Roofing today for a consultation on your existing roof or a new one.

Mike Kost

Chief Estimator

Date

February 18, 2020

Category