Question

The MacGregors have a basis in their home of $500,000. In 2024, they are considering having solar panels installed at a cost of $24,000. What is the amount of the credit they will be able to claim on Form 5695 and what will the adjusted basis in their home be once this credit is claimed under the rules for the Residential Clean Energy Credit? The credit will be $7,200. The adjusted basis in their home will be $507,200. The credit will expire at the end of 2023. As such, their basis will remain $500,000. The credit will be $7,200. The adjusted basis in their home will be $516,800. The credit will be $24,000. The adjusted basis in their home will be $476,000.

Answer 1

The MacGregors can claim a Residential Clean Energy Credit of $7,200 for installing solar panels costing $24,000. After claiming the credit, the adjusted basis in their home becomes $507,200, as $7,200 is subtracted from the original basis of $500,000.

The Residential Clean Energy Credit allows the MacGregors to claim 30% of the cost of solar panels.

In this case, the credit is calculated as 30% of $24,000, resulting in a credit of $7,200. Therefore, option a is correct.

To find the adjusted basis, the credit is subtracted from the original basis. The adjusted basis is the original basis minus the credit.

In this scenario, the adjusted basis is $500,000 (original basis) minus $7,200 (credit), resulting in $492,800.

Therefore, option a accurately represents the situation where the credit is $7,200, and the adjusted basis in their home is $507,200 after claiming the Residential Clean Energy Credit.