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Ask Robin D. Your Own Question

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7252
Experience:  15years with H & R Block. Divisional leader, Instructor
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I put a solar pv array in service in 2012 and I applied for

Customer Question

I put a solar pv array in service in 2012 and I applied for a tax extension because I dont understand the depreciation. What I would like from you is a numerical example using my provided inputs. I will round the numbers so the math will be easier. I am the sole owner of the LLC and spent 300,000 to build The system made almost 10,000 gross the first year. I also draw a salary from my construction company of $140,000. If I understand correctly, a solar pv array put in service in 2012 is allowed
Submitted: 11 months ago.
Category: Tax
Expert:  Robin D. replied 11 months ago.

Robin D :

Hello and thank you for using Just Answer,
If you elect to take as much as you are allowed then you could effect AMT. For AMT purposes, you generally must depreciate (deduct) business assets over a longer period of time than you can for regular tax purposes. This creates a difference between regular tax depreciation and AMT depreciation. This is an entry that does self-correct. By the time the asset is completely written off, you have received the same deduction for both regular and AMT purposes.
You may want to consider not using the 50% bonus, which could eliminate the AMT adjustment.

Robin D :

You will want to run your exact numbers through your software. You will need to look at last years return.

Compare the Tentative Minimum Tax to your regular tax (Tentative Minimum Tax should be the line above your regular tax) to see how close you were to paying the AMT.

Customer :

Is my total depreciable amount $300,000?

Customer :

I will be offline for a bit.

Customer :

I will also check on whether your bonus came from my credit card or paypal.

Customer :

because i never logged in to paypal.

Robin D :

You are allowed to use the installation cost as well in your depreciation calculation. If you took an Investment Tax Credit or a Treasury Program Grant you would only be allowed to use 85% of the cost for depreciation. The ITC is a 30 percent tax credit for solar systems. The 1603 Treasury Program is a technology-neutral program that allows solar and other renewable energy project developers to receive a direct federal grant in lieu of the Section 48 Tax Credit.

Robin D :

I did receive a bonus for the other question, that was very generous of you! When I posted "

Your positive rating is always thanks enough" I really mean that, so bonus payments are always special.


I am not privy to any payments with Just Answer so I cannot advise on payment options.

Customer :

I will have some numbers in a little bit.

Robin D :

I can give you a calculator if you need to know the amount for depreciation
http://www.free-online-calculator-use.com/macrs-depreciation-calculator.html
Scroll to the bottom of the page to enter the amount and dates for the solar

Customer :

I am reading through http://www.section179.org/

Customer :

but I still dont understand what 50% bonus depreciation means.

Customer :

Is my depreciable amount increased or am I allowed to depreciate a higher percentage or a multiple of my investment?

Customer :

2011: Wages: 140,000

Customer :

taxable income 79000, tax:9,500, payments:15,000, refund : approx 5000

Customer :

2012 wages 140,000

Customer :

solar installation 300000

Customer :

Fed grant 100,000

Customer :

I would like to know what bonus depreciation means?

Customer :

I got this from investopedia:

Investopedia explains 'Bonus Depreciation'

The actual amount of bonus depreciation varies from year to year, but it is offered on top of the maximum allowable Section 179 expensing limits and standard first-year depreciation. Bonus depreciation cannot be taken on property that is required to use the Alternative Depreciation Schedule, but it is exempt from alternative minimum tax (AMT) adjustments. Bonus depreciation is classified as a Section 1245 depreciation deduction when disposing of an asset, and is subject to recapture as ordinary income

Robin D :

Section 179 is generally taken first, followed by Bonus Depreciation. The 50% Bonus is taken after the $2 million limit in capital equipment purchases is reached. In your case you would depreciate using MACRS first.
As you received the federal grant you can only depreciate the 85% of the $300,000 (255,000).
According to my calculations, an asset having an unadjusted basis of $255,000 that was placed in service in (used Jan because I did not know real month) January of 2012, with a cost recovery period of 5 years and using the 150% Declining Balance method and a half-year convention, would yield a depreciation expense of $38,250 for the year 2012.

This means you could use the $38,250 for 2012 and then the remaining amounts for the next 4 years. OR you can expense (that is the 179 deduction) the full amount in 2012 for the solar. That would mean you would be using all in 2012 and have nothing to carry forward to 2013 against income.


Customer :

I am going to start a new question about tax exempt status (related to my previous question while we simultaneously work on this one)

Customer :

Is the 50% useless in my case?

Robin D :

Yes the 50% would not assist you

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