The solar tax credit, officially known as the Investment Tax Credit (ITC), is a federal incentive aimed at promoting the adoption of solar energy systems. It allows homeowners and businesses to claim a tax credit based on a percentage of the cost of installing a solar panel system. The solar tax credit has been instrumental in making solar energy more affordable and accessible to a broader range of individuals and organizations.

The solar tax credit works by allowing eligible taxpayers to deduct a percentage of the qualified solar energy system’s cost from their federal income taxes. The solar tax credit is currently set at 30% and will step down to 26% in 2033, and again down to 22% in 2034. The solar tax credit expires in 2035.

To claim the solar tax credit, taxpayers must meet specific criteria. The solar panels must be installed on a taxpayer’s primary residence or a secondary property, such as a vacation home. Additionally, the solar energy system must meet the qualifications set by the IRS, which typically require the panels to be certified and meet certain safety and performance standards.

The credit can be claimed in the tax year when the solar energy system is installed and placed into service. If the credit amount exceeds the taxpayer’s tax liability for that year, the excess can typically be carried over to future tax years until it is fully utilized. However, it’s worth noting that the solar tax credit is non-refundable, meaning it cannot be used to receive a refund beyond the taxpayer’s tax liability.

Overall, the solar tax credit serves as a powerful incentive that saves homeowners and business a lot of money when installing solar panels. By reducing the upfront costs associated with solar installations, the credit plays a significant role in accelerating the transition to clean and sustainable energy sources.

There has been some confusion in the past whether the solar tax credit covers the cost of re-roofing and roof repairs. Unclear legislative wording and lack of guidance have not helped matters. As a result, some roofing and solar companies have claimed roofing costs can be covered if they are necessary for the solar install. Others have claimed roofing costs can qualify if they are rolled into a solar loan. Some have even used this method to try covering roofing costs not associated with solar installations.

Despite all this confusion and gray-area, one thing is clear: The solar tax credit does not cover the costs of a new roof or roof repairs, regardless if they are necessary for the solar installation.

The IRS has issued guidance on what costs are eligible for the solar tax credit. According to the IRS, only the costs directly related to the installation of the solar panels are eligible for the solar tax credit. This includes the cost of the solar panels, inverters, wiring, and mounting hardware. The IRS has explicitly stated that the cost of repairing or replacing the roof is not eligible for the IRS solar tax credit (ITC) unless it is necessary to support the installation of the solar panels.

So while some roofing and solar companies might say the solar tax credit covers re-roofing and roof repair costs, that’s simply not the case. Even if the roof costs are necessary for the solar install, or if the costs are rolled into a solar loan, those costs are not eligible for the solar tax credit.

The IRS website says the following:  “In general, traditional roofing materials and structural components do not qualify for the credit. However, some solar roofing tiles and solar roofing shingles serve as solar electric collectors while also performing the function of traditional roofing, serving both the functions of solar electric generation and structural support and such items may qualify for the credit. Components such as a roof’s decking or rafters that serve only a roofing or structural function do not qualify for the credit.” 

Thus, in very limited circumstances, you might be able to deduct some roofing costs under the Energy Policy Act.

• If your existing roof lacks the structural strength to support the solar panels, you may need to reinforce it with new joists or sheeting. You may be able to deduct the cost of these upgrades.
• Another potential deduction would be specialized shingles designed to improve the efficiency of the solar panels.

Certain roofing materials, such as metal or asphalt shingles that meet Energy Star requirements, may qualify you for a 10 percent federal tax deduction. This deduction does not fall under the solar tax credit, but rather the Non-Business Energy Property Tax Credit.  Note that the tax credits mentioned above do not include installation costs.

The IRS has updated their frequently asked questions (FAQs) addressing whether certain costs related to nutrition, wellness, and general health are medical expenses under IRC section 213 that
may be paid or reimbursed under a health savings account (HSA), health flexible spending arrangement (FSA), Archer medical savings account (Archer MSA), or health reimbursement arrangement
(HRA).

IRC section 213 generally allows a deduction for expenses paid during the taxable year for medical care if certain requirements are met.Generally, taxpayers deductible medical expenses must exceed 7.5% of their Adjusted Gross Income for the next dollar to be deductible and the totality of their itemized deductions must exceed the standard deduction before any tax benefits can be realized. Furthermore, only unreimbursed medical expenses are eligible to be claimed on Schedule A. Thus, the vast majority of taxpayers are unable to meet these thresholds, unless they have catastrophic medical expenses.

Expenses for medical care also are eligible to be paid or reimbursed under an HSA, FSA, Archer MSA, or HRA. However, if any amount is paid or reimbursed under an HSA, FSA, Archer MSA, or HRA, a taxpayer cannot also deduct the amount as a medical expense on the taxpayer’s federal income tax return. Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. They also include the costs of medicines and drugs that are prescribed by a physician.

Medical expenses must be primarily to alleviate or prevent a physical or mental disability or illness. They do not include expenses that are merely beneficial to general health. The following FAQs were added to irs.gov on March 17, 2023.

Q1. Is the cost of a dental exam a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A1. Yes, because the dental exam provides a diagnosis of whether a disease or illness is present.
Q2. Is the cost of an eye exam a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A2. Yes, because the eye exam provides a diagnosis of whether a disease or illness is present.
Q3. Is the cost of a physical exam a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A3. Yes, because the physical exam provides a diagnosis of whether a disease or illness is present.
Q4. Is the cost of a program to treat a drug-related substance use disorder a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A4. Yes, because the program treats a disease (substance use disorder).
Q5. Is the cost of a program to treat an alcohol use disorder a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A5. Yes, because the program treats a disease (alcohol use disorder).
Q6. Is the cost of a smoking cessation program a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A6. Yes, because the smoking cessation program treats a disease (tobacco use disorder).
Q7. Is the cost of therapy a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A7.Yes, if the therapy is treatment for a disease. For example, an amount paid for therapy to treat a diagnosed mental illness is a medical expense, but an amount paid for marital counseling is not.
Q8. Is the cost of nutritional counseling a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A8. Yes, but only if the nutritional counseling treats a specific disease diagnosed by a physician (such as obesity or diabetes). Otherwise, the cost of nutritional counseling is not a medical expense.
Q9. Is the cost of a weight-loss program a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A9. Yes, but only if the program treats a specific disease diagnosed by a physician (such as obesity, diabetes, hypertension, or heart disease). Otherwise, the cost of a weight-loss program is not a medical expense.
Q10. Is the cost of a gym membership a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A10. Yes, but only if the membership was purchased for the sole purpose of affecting a structure or function of the body (such as a prescribed plan for physical therapy to treat an injury) or the sole purpose of treating a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). Otherwise, the cost of a gym membership is for the general health of the individual and is not a medical expense.
Q11. Is the cost of exercise for the improvement of general health, such as swimming or dancing lessons, a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A11. No, because the exercise, even if recommended by a doctor, is only for the improvement of general health.
Q12. Is the cost of food or beverages purchased for weight loss or other health reasons a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA? A12. Yes, but only if 1) the food or beverage doesn’t satisfy normal nutritional needs,
(2) the food or beverage alleviates or treats an illness, and (3) the need for the food or beverage is substantiated by a physician. The medical expense is limited to the amount by which the cost of the food or beverage exceeds the cost of a product that satisfies normal
nutritional needs. If any of the three requirements is not met, the cost of food or beverages is not a medical expense.
Q13. Is the cost of nonprescription (over-the-counter) drugs and medicines a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A13.Yes. Except for the cost of insulin, the cost of a drug that is not prescribed by a physician is not a medical expense that is deductible under IRC section 213. However, the cost of over-the-counter drugs and also menstrual care products may be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA.
Q14. Is the cost of nutritional supplements a medical expense that can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA?
A14. Yes, but only if the supplements are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. Otherwise, the cost of nutritional supplements is not a medical expense.

While much of the information shared by the IRS in the FAQ is not new some of the answers do bring a new level of clarification for those individuals, for example, who have Downs Syndrome and are dealing with obesity or diabetes or need physical and occupational therapy. Of particular relevance are the answers to Questions # 7-12 and 14. Please communicate with your physician to assure you have the proper documentation to support medical deductions for the categories discussed in these specific questions and answers.