It's quite often that we arrive at a residence to do a site survey and notice that the roof is near, at, or past the end of its service life. The most common type of roofing material—asphalt shingle—has a service life of 20 to 30 years, which approximates the life of a solar system: LG panels and Enphase mircroinverters are under warranty for 25 years. So it sometimes is necessary to replace or repair the roof prior to installing solar panels. When that's the case, the question often presents itself, can I apply federal and state solar tax credits against the cost of replacing the roof?
It's open to interpretation
The answer is that it depends on your interpretation of the tax code. Are you a strict or broad constructionist? Antonin Scalia? Or Ruth Baderg Ginsburg? Joking aside, the Federal Solar ITC from, IRS Form 5695, says: “No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed.”
That's a bit vague. Nothing will fail to qualify solar because it's a just a structural component. That sounds positive, because the roof is structural property on which the panels are installed. And yet, many conservative tax accountants will counsel that the language on the form is not authoritative and that the true source of authoritative language is the relevant tax code, IRS notices and tax court rulings.
What does the tax code say?
One interpretation of that form language is that the IRS is trying to say solar energy equipment will not be disqualified just because it's part of the structure of the house, but that equipment must still be directly part of the energy generation process; so tiles, which we don't recommend, won't be disqualified. The relevant code line itself says:
"(2) Qualified solar electric property expenditure The term “qualified solar electric property expenditure” means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer."
Again, does it mean property that generates electricity directly? Like panels? Does it include the roof on which the panels rest?
The vagueness in the language hear has allowed many homeowners and their tax professionals to apply the tax federal tax credits to the cost of pre-solar roof replacements, which can add thousands of dollars of savings and make going solar that much more of a great investment. Many have successfully applied the credit to their re-roofs and realized those savings. Ultimately, however, it's up to you and tax professional as to decide how you want to interpret the relevant language.