I'm looking into getting solar and the company is explaining to me that the tax credit will help me if I even get a refund that. Is this true?

[airmankey1991]

I typically pay 4100 and federal tax but get 1100 back. They told me that the 2900 I am supposed to pay is a tax liability so I would get all 4100 back to put towards the solar panels.

[Lisa995]

The solar credit can only be used to offset "income taxes", not self employment taxes or other types of taxes or penalties

Look at a copy of your 1040 tax return, Line 44 (I think) is your tax liability that can be offset by the solar credit....is that amount the $2900 ?

[airmankey1991]

I do not get at 10:40. I get a W-2. What the solar guy is telling me is I owe Uncle Sam $2,900 every year but I am paying him $4,100. When I look at my pay stub I can see how much federal tax I am paying.

[airmankey1991]

So essentially what he is saying is it would be like I wouldn't pay taxes at all. That money at the end of the year would come back to me and I could put it towards the solar panels. I just want to make sure this is true before I get them installed and then find out if the end of the year I don't get that credit back.

[SweetieJean]

Your 1040 in the tax return that you file.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/f1040.pdf">https://www.irs.gov/pub/irs-pdf/f1040.pdf</a>

[SteamTrain]

...and you put your W-2 income into that "Form 1040" tax return .

The BUT point was that if you have self-employment income also, it won' offset the SE taxes for that....which is why they pointed to line 44 of the form 1040 that you sent/send to the IRS. because that line is what the credit would offset (or line 30 of last year's 1040A if that's what you actually filed for 2017).  Of course, this assumes your income for 2018 is similar to 2017.

[airmankey1991]

2016 was 3,995 and 2017 was 2,496. I was deployed in 2017 so most of my taxes were exempt. But those are the numbers of what I owe the federal government. How would it work for state?

[Critter]

So ... in 2016 the max the credit that could have been used  was  3995  and 2496 in 2017... any unused credit is carried forward. You may not get the max if you have other non refundable credits which are used first to allow more of the solar credit to be carried forward.  So if you are putting the panels in 2018 then your tax liability (line 44) less the nonrefundable credits used is what the benefit will be in 2018 and the unused portion is carried forward.

[airmankey1991]

So let's say this year I pay 5000 to federal taxes when I only needed 3995. Does that mean I'll get $5,000 back? And I'll just put that towards the solar panels? Also are you familiar with how South Carolina state works?

[SteamTrain]

Call it $4000 and $5000.  You'd normally get $1000 back.   But the credit would be applied to the other $4000.   

It really depends on the size of the proposed credit ...if the credit is less than $4000 then you don't get it all back...if the credit is greater than $4000, then you get the whole $5k and the excess will get carried over to be (possibly) used the next year(s).

SC ..don't know myself..I would only know if I googled it, and you can do that easier than myself..and it might only apply if you are an actual SC  resident for income tax purposes....not just posted there.  But different states might apply their solar credits differently......and some allow none at all.

[airmankey1991]

I believe my Federal Credit was around $8,500 and my state was around $7,300. My total system cost was going to be $29,000. In my electric company will give me a rebate in the form of a check of $7,800. It would make my total system cost $5,600.

[Lisa995]

It shows youre posting from the Self Employed version....do you have self employment income?  are you married?  does your wife have self employment income?    if so, the self employment taxes would NOT be offset by the solar credit...which is why you need to look at the Form 1040 (yes you do have this form) and see what your "income" tax is.

[airmankey1991]

I have done uber previously in the past. I work two jobs.

[TaxGuyBill]

If the total system costs $29,000 and you get a $7,800 rebate from the utility company (I strongly recommend contacting your electric company to verify that amount, rather than just relying on the salesman), that puts your system cost at $21,200.

That means that your potential Federal Credit is $6360 ($21,900 x 30%).  If South Carolina works the same way, that would make the long-term South Carolina credit $5300 (if South Carolina uses the pre-rebate amount, it would be a $7250, but I suspect it would be the same was as Federal, but I'm unsure about that).

As the others pointed out above, your Federal Credit will be limited, but the unused amount will carry forward to future years until it can be used.  The amount you can use each year will be limited to an amount somewhere between the amount on Line 47 and Line 56 of your Form 1040 (it depends on which other credits you have on Line 48-54).

You can look at prior tax returns to get an idea of those amounts, but 2018 taxes have changed quite a bit, so it is likely your 2018 Line 47 and Line 56 will be slightly lower than previous years.

So that amount will directly increase the amount of your 'normal' refund by that credit amount.  So if you would otherwise get a $1000 refund (without any solar credit) and you are allowed a $4000 solar credit (based on Lines 47 and 56), then you will receive a total of $5000 for your Federal refund.

The credit for South Carolina is also limited each year.  It is limited to the lower of (1) 50% of Line 10 of your South Carolina return (if you have other credits, it could possibly be less than that) and (2) $3500.  Again, the unused amount will be carried forward to future years until it can be used (up to 10 years).

[airmankey1991]

That was actually really helpful. Does the federal tax break factored in after the rebates? I haven't looked into it expensively but I do know there is a rebate with Santee Cooper of $7,800.  My only concern is the 10-year thing I have never paid taxes in South Carolina because I just officially moved here in 2016 and the military and my civilian job both didn't change it for me even though I sent in the paperwork multiple times. I was still under North Carolina until November of 2017 LOL.