I have a taxpayer who is considering putting in a solar system in his home. He is a contractor and his company is an S-Corp. He got a quote from a solar company to install the solar system for $69,000. He researched and determined the parts would cost $18,000 and the balance is in the installation. He wants to hire his S-Corp to install the solar system. If he, as an individual pays the S-Corp the going rate for installation, and has good documentation of payment, would there be any reason why IRS could disallow the energy credit?
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Credit for his own labor???
So, he wants to receive an Energy Credit based on his labor? I'd run the other way from this idea . . .
Mike -
Actually, to the extent he's paying for parts, employees, or subcontractors it seems fair (though that doesn't mean I've concluded it's allowed).
But to the extent he's paying himself, what's his tax bracket? Suppose he pays $10K, treats 90% as wages to himself and 10% as S-Corp income. If he's in the 25% tax bracket, he'll pay about $3800 (.25*10K + .153*9K) in taxes for a $3000 credit (very ballpark).
So I don't know whether it's allowed, but at least make sure it's financially sensible before trying to research it.Comment
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I agree with the above. My question is...is he using personal funds to purchase the materials or is that also coming from the business?
If it is personal funds he can claim that amount. 30% of that exceeds the amount of the credit so why worry about the amount paid by the business?Believe nothing you have not personally researched and verified.Comment
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Residential Energy Credit
Taxpayer would pay his S-Corp for the expense of the labor (he has several employees) so he would personally be invoiced by the S-Corp and pay the S-Corp for the expense. His mindset is that the solar company was charging approx. $51,000 in labor and his S-Corp company's employees could do it for a lesser fee and he still get the 30% credit. So with this scenario, would there be any reason the IRS could disallow the credit?Comment
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