If I install solar panels at my home in two separate stages, does each stage qualify for its own $5,000 tax credit, or is the credit capped in total per residence?

Plain-English summary

A petitioner planned to install solar energy system equipment at his New York principal residence in two stages. Stage one - ten pole-mounted 245-watt solar panels producing a total of 2.45 kilowatts - would cost $20,090 and was expected to go in during spring 2012. Stage two - six pole-mounted 245-watt panels producing 1.47 kilowatts - would cost $7,350 and was expected to go in either fall 2012 or spring 2013. Each stage would have its own distinct placed-in-service date. The petitioner asked whether each stage would qualify individually for the solar energy system equipment credit, up to the $5,000 credit limitation, and whether the answer would change depending on whether both credit claims were filed for the same tax year or, as the petition phrased it, one claim made for a stage completed in 2011 and another for a stage completed in 2012.

The Department concluded that the petitioner is eligible only for an aggregated credit not exceeding $5,000 total, not a separate $5,000 credit for each stage. Under Tax Law § 606(g-1)(1) and (2)(A), the credit equals 25% of qualified solar energy system equipment expenditures for equipment installed at a New York principal residence, capped at $5,000 for equipment placed in service on or after September 1, 2006. The credit is claimed in the taxable year the property is placed in service.

To reach this conclusion, the Department traced the credit's legislative history. When the credit was created in 1997, it had no dollar cap at all - only an "expenditure cap" equal to $1.50 times the system's wattage. In 1998, that expenditure cap was raised to $6.00 per watt to make small residential systems more attractive, but a new $3,750 overall dollar cap was added to control the cost of high-output systems. Effective for equipment placed in service on or after September 1, 2006, the dollar cap was raised to $5,000 and the wattage-based expenditure cap was eliminated entirely.

The Department also pointed to Tax Law § 606(g-1)(4) and (5), which require the credit to be prorated among multiple taxpayers who share a residence or among condominium/cooperative members, based on each one's share of the total expenditures - illustrated with two worked examples of taxpayers splitting a $40,000 and a $20,000 system, respectively. That the Legislature limited the credit on a per-residence basis when multiple taxpayers are involved showed intent to cap the credit in the aggregate for all solar equipment installed at a given principal residence, regardless of how many installation stages it takes to get there. Based on the costs described, the petitioner's first-stage expenditure of $20,090 alone (25% of which is $5,022.50) already exceeded the $5,000 cap, so the petitioner would max out the credit with the first project stage and receive nothing further for stage two.

What this means for you

Homeowners installing solar equipment in phases

If you install solar energy system equipment at your New York principal residence over multiple stages or project phases, don't expect a fresh $5,000 credit for each phase. The credit is capped at $5,000 in total per residence under Tax Law § 606(g-1)(1), no matter how many separate installations or placed-in-service dates are involved, and no matter whether you claim the credit for two stages in the same year or split across different tax years.

Homeowners sharing a residence with other taxpayers

If you share your principal residence with other taxpayers who also contribute to the cost of solar energy system equipment, the $5,000 cap still applies in the aggregate to the equipment at that residence - it is then prorated among the co-owners under Tax Law § 606(g-1)(4) (or § 606(g-1)(5) for condominium/cooperative arrangements) based on each person's share of the total expenditures.

Common questions

Q: Does each stage of a multi-stage solar installation get its own $5,000 credit?
A: No. The $5,000 credit limitation under Tax Law § 606(g-1)(1) applies in the aggregate to all solar energy system equipment installed at a taxpayer's principal residence, not separately to each installation stage.

Q: Does it matter whether both stages are placed in service in the same tax year or in different years?
A: No. The Department concluded the aggregate $5,000 cap applies whether the equipment is placed in service at the same time or in stages across different tax years; each stage's portion of the credit is simply claimed in the year that stage is placed in service.

Q: How is the credit calculated?
A: The credit equals 25% of qualified solar energy system equipment expenditures, capped at $5,000 for equipment placed in service on or after September 1, 2006.

Q: What if the first stage of an installation already costs enough to hit the $5,000 cap?
A: Then the taxpayer maxes out the credit with that first stage alone and gets no additional credit for later stages, as happened with the petitioner here, whose first-stage expenditure of $20,090 already generated a credit exceeding $5,000.

Q: Does the cap change if multiple taxpayers share the residence?
A: The $5,000 cap still applies per residence, but under Tax Law § 606(g-1)(4) it is prorated among the taxpayers according to each one's share of the total expenditures on the equipment.

Citations and references

• Tax Law § 606(g-1)(1) - Article 22 credit for solar energy system equipment, capped at $5,000 for equipment placed in service on or after September 1, 2006
• Tax Law § 606(g-1)(2)(A) - definition of qualified solar energy system equipment expenditures
• Tax Law § 606(g-1)(3) - definition of solar energy system equipment
• Tax Law § 606(g-1)(4) - proration of the credit among multiple taxpayers sharing a principal residence
• Tax Law § 606(g-1)(5) - proration of the credit for condominium management association members and cooperative housing tenant-stockholders
• Tax Law § 606(g-1)(7) - the credit is claimed in the taxable year the property is placed in service
• Ch. 399 of the Laws of 1997, § 4 - original creation of the credit with a watts-based expenditure cap
• Ch. 467 of the Laws of 1998 - raised the expenditure cap and added a $3,750 dollar cap
• Ch. 378 of the Laws of 2005, § 1 - raised the dollar cap to $5,000 and eliminated the watts-based expenditure cap

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a13_1i.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-13(1)I
Income Tax
January 8, 2013

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I120207A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted. Petitioner plans to install solar energy system equipment at his
principal residence in two stages, beginning and ending at different times. Petitioner asks
whether both stages of the installation will each qualify for the solar energy system equipment
credit individually, up to the credit limitation of five thousand dollars. Petitioner also asks
whether the answer will be different if the credit claims are both filed for the same tax year as
opposed to one claim made for stage one if it is completed in 2011 and one claim made for stage
two if it is completed in 2012.
We conclude that Petitioner is eligible for an aggregated credit not exceeding five
thousand dollars. The credit is allowed in the taxable year in which the property is placed in
service.
Facts
Petitioner plans to install solar energy equipment at his principal residence in two stages.
The first project stage will involve installing ten pole-mounted 245-watt solar panels capable of
producing a total of 2.45 kilowatts for a total cost of $20,090. This installation is expected to
occur in the spring of 2012. The second project stage will involve installing six pole-mounted
245-watt solar panels capable of producing a total of 1.47 kilowatts for a total cost of $7,350.
This installation is expected to occur either in the fall of 2012 or the spring of 2013. Both
installations will be placed in service at Petitioner’s principal residence in New York State. Each
installation will have its own distinct placed-in-service date.
Analysis
An individual taxpayer is allowed a credit against the tax imposed under Article 22 of the
Tax Law for the installation of certain solar energy system equipment.1 The credit is equal to
25% of the qualified solar energy system equipment expenditures, but not to exceed five
thousand dollars for qualified solar energy system equipment placed in service on or after
September 1, 2006.2 “Qualified solar energy system equipment expenditures” are defined in part
as “expenditures for the purchase of solar energy system equipment which is installed in
connection with residential property which (i) is located in this state and (ii) which is used by the
1
2

Tax Law §606(g-1)(1).
Id.

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TSB-A-13(1)I
Income Tax
January 8, 2013

taxpayer as his or her principal residence at the time the solar energy system equipment is placed
in service.”3 The term “solar energy system equipment” is defined in part as an arrangement or
combination of components using solar radiation, which, when installed in a residence, produces
energy designed to provide heating, cooling, hot water or electricity for use in such residence.4
Petitioner asked whether the five thousand dollar credit limitation applies to each
installation of solar energy system equipment when it is placed in service or whether the
limitation is a five thousand dollar maximum credit that applies to the aggregated expenditures
for all solar energy system equipment placed in service at the taxpayer’s primary residence.
When the solar energy system equipment credit was added to the Tax Law in 1997, it
contained an “expenditure cap” which was the product of $1.50 and the number of watts of
capacity.5 There was no limitation on the dollar amount for the credit. In 1998, the credit was
amended by raising “the expenditure cap” to the product of $6.00 and the number of watts
generated by the system. The objective was to make installation of small generating systems
more attractive to residential homeowners.6 In order to limit the expense of that increase for the
installation of high-output systems, the law then provided that “This credit shall not exceed three
thousand seven hundred fifty dollars.”7 The credit limit was subsequently raised to five thousand
dollars for property placed in service on or after September 1, 2006 and the expenditure cap, tied
to the capacity of the watts in the system, was eliminated.8
By limiting an individual taxpayer’s credit for expenditures on qualified solar energy
system equipment installed at his or her New York residence to five thousand dollars, the
Legislature indicated a desire to control the overall cost of the program. The Legislature
previously limited the credit allowed to multiple taxpayers. If solar energy system equipment is
purchased and installed in a residence shared by two or more taxpayers, the amount of the credit
allowable for each taxpayer must be prorated according to the percentage of the total
expenditures contributed by each taxpayer.9 The following examples illustrate how the credit
would be calculated.
Example 1: 2 taxpayers share a principal residence. Each taxpayer
contributes $20,000 to purchase solar energy system equipment
costing a total of $40,000. The credit amount is 25% x $40,000 =
$10,000, subject to a cap of $5,000. Each taxpayer may claim a
credit of $2,500.
Example 2: 2 taxpayers share a principal residence. Taxpayer 1
contributes $15,000 to purchase solar energy system equipment
costing a total of $20,000, and taxpayer 2 contributes $5,000. The
3

Tax Law §606(g-1)(2)(A).
Tax Law §606(g-1)(3)
5
Ch. 399 of the Laws of 1997, §4.
6
Ch. 467 of the Laws of 1998 – Memorandum in Support.
7
Ch. 467 of the Laws of 1998, §2.
8
Ch. 378 of the Laws of 2005, §1.
9
Tax Law §606(g-1)(4).
4

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Income Tax
January 8, 2013

credit amount is 25% x $20,000 = $5,000. Taxpayer 1 may claim a
credit of $3,750, and taxpayer 2 may claim a credit of $1,250.
A similar provision allows a proportionate share of the total solar energy system equipment
expenditures to be claimed as a credit by a taxpayer who is a member of a condominium
management association or a tenant-stockholder in a cooperative housing corporation.10
The legislative history of the credit and the calculation of the allowance of the credit,
when multiple taxpayers sharing the same principal residence contribute to the qualified solar
energy system equipment expenditures, lead to the conclusion that the Legislature intended to
limit the credit to an aggregate of five thousand dollars for such equipment installed in each
principal residence. Thus, Petitioner’s planned installations of solar energy system equipment at
his New York residence, whether placed in service at the same time or in stages (in 2011 or 2011
and 2012), will be eligible for a maximum aggregate credit of five thousand dollars. The credit
is claimed in the taxable year that the property is placed in service.11 Based on the information
submitted, Petitioner will max out the credit with the first project stage.

DATED: January 8, 2013

NOTE:

10
11

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.

Tax Law §606(g-1)(5).
Tax Law §606(g-1)(7).