Question

Are Whole House Standby Generators Tax Deductible?

Going through a power loss is never an enjoyable time. The good news is that in most situations the actual power loss only lasts a few hours before it flickers back on and everything goes back to normal. But, what do you do when your power is out for a day or days at a time? How do you cope? In some cases it is just an inconvenience as you cannot watch your favorite television show, movie, or play a game.

In other cases though it can get more serious such as a power loss event in the middle of summer. My family and I live in Kansas and the summers here can be quite brutal. Typically between July and August we will have weeks at a time where the high temperatures reach over one-hundred degrees and the lows are in the eighties. If your air conditioning is out due to a power loss then it is not only going to be uncomfortable but it could also be dangerous.

To cope with these power losses many folks turn to generators. There are two main types of generators: The portable and the standby whole home models. Portables offer a cheap quick fix option but they are dirty, heavy, dangerous, and have to be manually setup each and every time the power goes out. A standby whole home generator system is the exact opposite. Once the unit has been installed and is operating correctly there is no setup required. When the power does go out you will only notice a flicker of the lights before the standby unit comes on. Presto! You have power again.

The biggest problem with standby systems are their cost. In most cases you can expect to pay about four-thousand dollars all the way up to twelve-thousand dollars for the system. Then you also have to factor in the cost to install the standby generator. Typically the installation costs are about the same as the purchase cost. So, if you spent five-thousand dollars on a standby system then you can expect to pay another five-thousand dollars on the installation cost.

Are They Tax Deductible?

Now, let me first preface this section saying that I am by no means a tax expert. My findings below are what I have discovered through researching and reading several different sources on the matter. That being said, since standby systems are such a significant expense many folks wonder if they can qualify for tax breaks. After all, you could end up spending ten-thousand dollars or more on the system… it would be nice if you could write some of that expense off when you do your taxes.

So, lets get to the bad news first. In most cases standby systems are NOT tax deductible. You have to remember that a standby system is not like a wind or solar power system. Standby systems have an engine that burns through natural gas or liquid propane. This is not a clean climate friendly solution. Typically you see government tax credits going towards the more environmentally friendly solutions such as solar or wind power. There are not any government programs out there that offer tax credits for installing a standby system.

There is one catch, or loophole though, when it comes to tax credits on standby generators and that is medical expenses. If the standby system that you are installing will be powering medical equipment for you or someone in your family then you could receive a tax credit based on the difference between your the value your home raised and the total bill to purchase and install the generator.

Lets look at this a bit further. Most standby systems will raise your home’s value by about half the cost of the system/install. Again, if you spend ten-thousand dollars on the purchase and install of your system then you can expect to see your home’s value to raise by five-thousand dollars. The difference between that final ten-thousand dollar bill and your home’s raised value is five-thousand dollars. This is the amount of a tax credit that you could receive if you are powering medical equipment with the standby system.

The only other avenue I can see standby systems and tax credits working out is if you own a business and that business needs the standby system in order to function. Say for example you own a restaurant and you need your freezer and refrigerators to be constantly powered. A power loss could mean a loss of thousands of dollars of food. Purchasing a standby system for your business could be written off as a business expense. Before doing this though I would make certain that you can justify the purchase of the standby generator for your business. What repercussions are there if you lose power? How much of a loss is involved? Does the standby generator make sense?

Conclusion

Again, I am not a tax professional here and if you want to pursue this further I would recommend reaching out to an accountant or a tax professional before you decide to purchase your standby system. They will be able to tell you for certain on rather or not you can receive a tax credit or even a business deduction when it comes to the purchase and install of your standby generator.

Thanks for reading,

Alec Johnson

ToughAssTools.com

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