Reserve the L1
Reserve the L1

Customer Tax Credit Information

Customer Information Regarding IRC Section 25D Tax Credit1

Thank you for your interest in the Lightship L1. In order to help you and your tax advisors determine whether you may be eligible for a tax credit relating to the purchase of your new L1, Lightship has compiled some basic information that may help your tax advisors determine whether you are eligible for a tax credit. The information included here was prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.

As your L1 is equipped with solar and energy storage equipment, you may be eligible for a tax credit under Internal Revenue Code Section 25D for the portion the L1 purchase price associated with that equipment.

In December of 2022, the IRS released a fact sheet regarding applicable tax credit requirements and changes related to the Inflation Reduction Act entitled Frequently asked questions about energy efficient home improvements and residential clean energy property credits (irs.gov),2 which can serve as an additional resource to you and your tax advisor to help determine eligibility.

How May the Solar and Energy Storage Equipment in My L1 Qualify for a Tax Credit?

The residential clean energy property credit under Section 25D is a 30-percent credit for certain qualified expenditures made by a taxpayer for residential energy efficient property. The Inflation Reduction Act extended the residential clean energy property credit through 2034, modified the applicable credit percentage rates, and added battery storage technology as an eligible expenditure.

A tax credit is available under Section 25D for certain solar3 and battery storage4 related expenditures if installed in connection with a dwelling unit located in the United States and used as a residence by the taxpayer. The solar property must use solar energy to generate electricity for use in a dwelling unit.5 The battery storage technology must have a capacity of not less than 3 kilowatt hours.6

Can My L1 Be Considered a Dwelling Unit?

Yes, your L1 may be considered a dwelling unit. IRC Section 280A provides that as “in general the term dwelling unit includes a house, apartment, condominium, mobile home, boat, or similar property, and all structures or other property appurtenant to such dwelling unit,”7 as long as such dwelling unit “provides basic living accommodations such as sleeping space, toilet, and cooking facilities.”8 The qualification of RVs as dwelling units has also been confirmed by case law.9

Does It Matter that the Solar and Energy Storage Equipment Was Incorporated into a New Dwelling?

No, the IRS has confirmed that under Section 25D a taxpayer can claim the credit for qualifying expenditures incurred for either an existing or new dwelling.10

Does My L1 Need to Be My Primary Residence to Qualify?

No, the IRS has clarified that a taxpayer may claim a Section 25D credit for qualifying equipment “installed in or on a dwelling unit used as a second home or a vacation home by the taxpayer. But a taxpayer may not claim the § 25D credit for expenditures for improvements made to an investment property, such as rental property, that is not also used as a residence by the taxpayer.”11

What Are the Applicable Residence Requirements?

Generally, a dwelling unit is considered a residence only if a taxpayer (or certain other people) personally uses the dwelling unit during the taxable year for a number of days that exceeds the greater of 14 days or 10% of the number of days on which the unit is rented at a fair rental.12 Consult your tax advisor regarding how your anticipated use may impact your tax credit eligibility.

How is the Amount of the Tax Credit Determined?

The residential clean energy property credit is 30-percent of the cost of qualified solar and battery storage expenditures made by a taxpayer for residential energy efficient property. When calculating the credit, a taxpayer may include the labor costs properly allocable to the assembly, or original installation of the qualified property and wiring to interconnect the qualifying property to the dwelling unit.13

In order to help you and your tax advisor determine the applicable portion of the overall purchase price of your L1 that may be considered an eligible expenditure, Lightship will provide documentation at vehicle delivery that provides an estimate of eligible costs based on the corresponding costs of solar and battery storage components and applicable installation costs, as compared to the overall cost of your L1. Before claiming the tax credit, you should discuss with your tax advisor the appropriate amount of tax credit that you should claim.

What If I’m Not Able to Use the Tax Credit This Year?

Under Section25D, a taxpayer may carry forward an unused amount of the credit to reduce tax liability in future tax years.14

Notes

  1. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. The availability and amount of the tax credit associated with the purchase of your L1 is subject to certain criteria and eligibility requirements. You should consult your own tax and accounting advisors regarding whether a tax credit is available to you. Lightship does not provide tax, legal or accounting advice.
  2. FS-2022-40, https://www.irs.gov/pub/irs-drop/n-13-70.pdf.
  3. IRC Section 25D(a)(1).
  4. IRC Section 25D(a)(6).
  5. IRC Section 25D(d)(2).
  6. IRC Section 25D(d)(6).
  7. IRC Section 280A(f)(1)(a).
  8. Prop. Reg. §1.280A-1(c)(1).
  9. Haberkorn v. Commissioner, 75 T.C. 259 (1980) (mini motor home); Jackson v. Commissioner, 672 Fed. Appx. 760 (9th Cir. 2017), aff'g T.C. Memo 2014-160 (RV and motor home are interchangeable terms); Loughlin v. United States, 82-2 USTC ¶9543 (D. Minn. 1982) (motor home).
  10. FS-2022-40, https://www.irs.gov/pub/irs-drop/n-13-70.pdf.
  11. IRS Notice 2013-70.
  12. IRC Section 280A(d)(1).
  13. IRC Section 25D(e)(1).
  14. FS-2022-40, https://www.irs.gov/pub/irs-drop/n-13-70.pdf.