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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
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Experience:  Over 20 Years experience
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Tax Question: If you are the sole proprietor of a construction

Resolved Question:

Tax Question: If you are the sole proprietor of a construction business and you purchase
a new solar system for your personal use at your home, can you hire your business to do the installation and deduct that expense along with the purchase price of the solar system on your taxes for the residential energy credit?
Submitted: 5 years ago.
Category: Tax
Expert:  R. Klein, EA replied 5 years ago.

Randalltax :

You can certainly install the solar energy system yourself. Since the credit is based upon the total cost including labor to install, the credit would be based on the actual money paid to your company. But this is circular logic that does not benefit you.

Randalltax :

Since you would have to have a money trail showing you, Bob, paid Bob's Company, then Bob's Company would have additional taxable income. Then you would have to pay both income tax and self-employment tax on that additional income.

Randalltax :

In the net, you might have a 30% tax credit on the installation paid, but your personal income tax would be 35% of the installation cost because of federal and state income taxes.

Randalltax :

That isn't really intelligent. So I would have Bob the "homeowner" install it and not pay Bob's Company to do the installation.

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