Solar panel, Home office and Tax write off?

The solar panels are a capital improvement. You can deduct 15% of the depreciable portion of the property as part of the home office deduction. You'd have to depreciate the solar on the same 39 year straight line schedule as the house itself. (The land value is never depreciated so you'll have to break that out separately.)

Since this is business use of real estate, the depreciation is over 39 years, not the 27.5 years for residential rental real estate. That crunches out to a whopping $38 deduction per year for the depreciation on the solar panels. ($10,000 x .15) / 39 = $38.46 which rounds down to $38. If you're in a 25% tax bracket, that will save you a whopping $10 in taxes.

Keep in mind that when you sell the home, the depreciation allowed or allowable will be subject to recapture. That is taxable income subject to a maximum tax rate of 28% even if you can exclude the gain on the sale under Section 121. For that reason you might wish to consider the safe harbor deduction new for tax year 2013. You may deduct a flat $5 per square foot up to 300 square feet for a maximum deduction of $1,500. That won't trigger the depreciation recapture (for the years that you use it, you can switch off year for year if you wish) and may reduce the likelihood of an audit as well.

Home Office Write Off

You would have to depreciate the office portion over a very long time frame in years. Contact a qualified tax professional as home office deductions set off all sorts of red flags.

15% of the Net Cost (After Rebates) Depreciated over 27.5 years.

EDIT: Oops ....39 years.

I was actually debated that in my head before I posted.

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