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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
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Experience:  35 years tax experience, including four years at a Big 4 firm.
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I file jointly approx$150,000. I put a solar PV array in service

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I file jointly approx$150,000. I put a solar PV array in service this year. The cost was $300,000. I am allowed 50% bonus depreciation for this year. Can I use depreciation to offset my taxes withheld and see a large refund or will the alternative minimum tax chump me?
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Customer: replied 4 years ago.
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Thanks
Welcome to the site. I will be helping you today.

It sounds like you put this in service for your home. As such, unless it is used for business, there isn't a depreciation deduction.

There is a credit available as well, available if the PV installation is used for business. http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx is a link to a good discussion of the topic.

If the system is used for business, depreciation for 2012 will be limited to 50% bonus depreciation. Basis would be 100% or reduced if you tax the tax credit mentioned above. http://www.brightstarsolar.net/2011/01/depreciation-benefits-for-commercial-solar-installations/ is a good discussion of the subject by a PV vendor. Please again keep in mind this is for commercial installations.

I am curious if you will be selling electricity back to the 'grid', if that qualifies for business use. I will look into that and get back to you. Could you confirm the use of the equipment, and the split of personal and resale electricity?
Customer: replied 4 years ago.
Hi and thanks for the response.
The system production is assigned to an off site business. There is no on site load. In other words all electricity produced goes into the grid. The system is a business.
Then the system is eligible for the credit, and the remainder is eligible for bonus depreciation in the first year of 50% of the remaining basis for 2012.

Since this is a business, and you want to use bonus depreciation, you are required to use an AMT method of depreciation to calculate AMT. It is allowed, so there will not be a sizable adjustment for your expected loss from the PV business.

Thanks for asking at Just Answer.
Customer: replied 4 years ago.
Is just the bonus depreciation allowed in the amt calc or the entire depreciation?
The remainder will have different depreciation methods and lives. The depreciable life for MACRS is five years, double declining basis. AMT depreciation will be different.

Thanks for asking at Just Answer/Pearl.
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4514
Experience: 35 years tax experience, including four years at a Big 4 firm.
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