Personal Finance

ONT ONLY - microFIT solar panel program: 10-14% return for 20 yrs * FAT LADY HAS SUNG

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[OP]
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Nov 18, 2005
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Frankdee wrote:
Mar 14th, 2015 5:34 pm
What many homeowners should ask themselves is....Is it really worth registering as a business to save paying the $4000 HST only to open myself up to possible Capital gains on my home many years down the road? My accountant says no.
No they shouldn't ask themselves that question. Either you've misunderstood your accountant or you should get another accountant. The only possible capital gains are on the solar panels, not your principal residence.
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Nov 29, 2011
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Please show me where on the CRA website where it tells you that none of the appreciation in your home will be taxed as a capitol gain in the future. Many of the people having a micro fit system installed will be re-roofing before the install. Accountants such as yourself will tell them that they can wright the roof off as part of the business. Sure you can but your house in now part of that business. If in 20 years your home is now double todays price, you will have to pay a capital gain on 50% of the increase in value and the CRA could say that you will pay a small percent or a large percent of that 50% of your home. Either way you will be paying a lot more than you saved. You didnt even know about not having to register as a business and you now tell me that you completely understand the CRAs interpretation of the micro fit and all of its tax implications. Sure.....
[OP]
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Frankdee wrote:
Mar 14th, 2015 7:19 pm
Please show me where on the CRA website where it tells you that none of the appreciation in your home will be taxed as a capitol gain in the future.
From the previously posted link:
[INDENT]12. Will a Participant who installs a solar pv system on the roof of his or her residential home and enters into a Contract continue to maintain the home as a principal residence?

Yes. For more information on "principal residence", see Chapter 6 of Guide T4037, Capital Gains.

13. If a Participant sells his or her residential home, which includes a renewable energy property, are there any income tax consequences?

Yes. Where a Participant sells his or her residential home, which includes a renewable energy property, a reasonable portion of the sale price must be allocated as proceeds of disposition of the renewable energy property and reported in Area A on page 5 of your Form T2125, Statement of Business or Professional Activities. This may result in a recapture into income of any CCA claimed on the property and such recaptured income must be reported for income tax purposes. For more information on reporting dispositions of depreciable property, please refer to Chapter 4 of Guide T4002, Business and Professional Income.

The balance of the sale price is generally allocated to the residential home. If the residential home was designated as a principal residence for every year that it was owned, there will be no income tax consequences on the disposition of the residential home. For more information on "principal residence", see Chapter 6 of Guide T4037, Capital Gains.[/INDENT]

The parts in red mean that your home (principal residence), excluding the solar panels is still non-taxable.
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Nov 29, 2011
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Thats not the whole story and you know it.
[OP]
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Frankdee wrote:
Mar 14th, 2015 8:23 pm
Thats not the whole story and you know it.
It is the whole story and I know it.

If you choose not to register for HST or claim CCA against your solar business income that is completely up to you. But you'll be losing over $11,000 and gain nothing so I would hate to see others follow your advice. If anyone has any doubts I urge you to take the document from the earlier link to a qualified accountant.
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Nov 29, 2011
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JWL wrote:
Mar 14th, 2015 8:45 pm
It is the whole story and I know it.

If you choose not to register for HST or claim CCA against your solar business income that is completely up to you. But you'll be losing over $11,000 and gain nothing so I would hate to see others follow your advice. If anyone has any doubts I urge you to take the document from the earlier link to a qualified accountant.
There you go again, forgetting to mention the capitol gain when the home is sold. The tax one pays later may well exceed the amount saved and if you have died, your family will have to bear the burden. The very fact that you would not mention that one does not have to turn this into a business and collect the HST and then pay it back shows that you have an agenda as an accountant. I will bet that you have collected a few clients from this site. Anybody reading your post should be very careful to weigh in ALL the possibilities before making a decision. Remember this....The CRA can and will change the rules of the game as the game goes on and they are always retroactive The CRA never loses. The accountants and lawyers also never lose.
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Apr 20, 2011
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If you're that concerned, cancel your FIT contract, remove the panels, liquidate the assets, close your business before selling your home.

Or, you know, go by what the CRA said themselves on the matter.

P.s. they're the same scenario. One is before sale, one is during sale. Except one let's the next owner continue the contract.
[OP]
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Frankdee wrote:
Mar 15th, 2015 12:10 pm
There you go again, forgetting to mention the capitol gain when the home is sold.
I didn't forget. Gains on the sale of your home ("principal residence" in CRA terms) are not taxable.

I don't take clients and am giving all this tax info away for free.

I'm going to summarize the taxation that has been bandied about, then add Frankdee to my ignore list (of 2) as I'm tired of the abusive comments and misinformation. Thanks to those of you who have sent PM's of support. If anyone really wants me to respond to frankdee's version of tax rules just PM me.


You do NOT need to get a Business Registration number and register for HST. My earlier post indicating you must register was incorrect. It is still my advice that you SHOULD register.


If you DO get a Business Registration number and register for HST:
- you get back the ~$4k of HST you paid on your system
- you can get back any HST you pay on expenses (if any) to maintain and repair your system
- you MUST annually file an HST Return (put in the amount you received, HST you received and HST you paid) and remit the net HST amounts you collected.
There are no other consequences of Business Registration

Whether or not you register your "solar business"
- you MUST report the revenue you receive from hydro under your microFIT contract as income via a T2125 and pay tax on it
- you CAN deduct the cost of the system over time via CCA (explained a page or two earlier). Should save $7K+ in taxes over the life of the system.
- on the sale of your home you MUST estimate the portion that is for your panels. If there is a gain over the unamortized CCA you have to pay tax on that. If the amount is less than the unamortized CCA you can claim the loss on disposition. The net affect of all of this is that you end up writing off the NET cost of the system (what you paid minus what you received) and reduce the taxes you paid. THERE IS NO OTHER CONSEQUENCE.
- any gain related to the sale of your home remains non-taxable as you've kept the panels separate from your home.

All of this is 100% clear from the CRA link previously posted if you understand tax terminology.
Member
Jun 8, 2010
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Toronto
If you are that concerned about future consequences, you can get a ruling by contacting the CRA. They will provide it you you in writing.
Newbie
Jul 23, 2011
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Toronto
Hi JWL,

I have read much of what you have sad in this thread. Thank you for all the advice, you seem very well informed on this topic and have provided lots of good points.
With you being an accountant I have a question that I don't think has been asked before in this thread that I'm hoping you might know the answer to.

Is there a way to make the initial investment through a TFSA and then get the gains through this "investment" tax free?
[OP]
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wesmorrow wrote:
Mar 26th, 2015 5:00 pm
Is there a way to make the initial investment through a TFSA and then get the gains through this "investment" tax free?
Thanks for your compliments.

The short answer regarding your TFSA is "no". It isn't an investment in a company so it doesn't qualify for TFSA. If it was owned by a company it wouldn't qualify for microFIT.
[OP]
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funkyjohn wrote:
Mar 27th, 2015 10:37 pm
What opinions do people have on the validity of these tax write-offs as mentioned in this blog: http://www.guelphsolar.net/apps/blog/sh ... r-microfit Particularly I am piqued by the ability to write off costs of re-shingling a roof. I need to put a new roof on this year!
Here is the list of suggested tax write-offs in the link funkyjohn provided:
  1. 25% of your property tax becomes a business expense ~ $1000 annually;
  2. Roof repairs (reshingling) becomes a business expense (proportionate to the space covered by panels) ~ $2000;
  3. Solar panels protect the shingles from the sun so there are avoided costs;
  4. All internet becomes a business expense ~ $600 annually;
  5. Portion of home owner's insurance becomes a business expense ~ $200 annually;
  6. Cost of completing tax return becomes a business expense ~ $100 annually;
  7. Interest on the solar investment loan becomes a business expense ~ $2300 annually.
Most of these I find VERY aggressive (which is accountant-speak for "I don't think CRA would allow that"):
  1. Very very very aggressive. Solar panels explicitly DON'T affect your property taxes, you aren't deducting the cost of land and buildings, and microFIT installs have to be on existing buildings, so I don't know how you could justify any part of property taxes.
  2. I had thought roof repairs were reasonable until I saw them in this list of items! But if I was in that situation I would go ahead and include them in your install cost (proportionate amount to the roof slopes covered in solar panels
  3. True
  4. Very aggressive. At best you could count the amount of internet used by the solar business which is minute
  5. True you can deduct the incremental cost of insurance (I do)
  6. Aggressive. Most of the tax return is non-business and the business part is very simple.
  7. OK. Just make sure the borrowings for the solar business are segregated from other borrowings.
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Wouldn't the weight of solar panel put additional strain on the house? Any leakage concerns? Also, do you have to put them on the roof?

There was also a case in the US where a home owner sued her neighbor for damaging her view.

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