Full solar tax credit being applied by TurboTax and is now showing a sizeable refund. I thought it was only supposed to cover tax liability?

[isaac_alba]

The last bit of tax info I entered into TurboTax this year was related to the solar panels we had installed in 2020.  Right before entering this info, we *owed* ~$1600 (Federal).  Based on the cost of the solar install, we qualified for a credit of ~$4600.  My understanding of the solar tax credit is that only the amount needed to cover our tax liability would be applied.  Instead, once I entered the details related to the solar panel install, Turbotax quickly shot our federal *refund* up to around $3000 (i.e. applied our full solar install credit instead of simply covering the tax liability).  I don't think this is right, but I'm not sure how to change it.  I mean, I'd like $3k as much as the next person, but from my reading of the solar tax credit, this isn't how it should work.  Help?

[ColeenD3]

Yes, the credit is not refundable. First, double check you entries for a possible mistake. Next, if you don't find one, print out copies of your return, with and without the credit, to see where the changes are. You will need to go line by line to track the discrepancy.

Solar tax credit amounts

Installing renewable energy equipment in your home can qualify you for a credit of up to 30% of your total cost. The percentage you can claim depends on when you installed the equipment.

• 30% for equipment placed in service between 2017 and 2019
• 26% for equipment placed in service between 2020 and 2022
• 22% for equipment placed in service in 2023

As a credit, you take the amount directly off your tax payment, rather than as a deduction of your taxable income.

[MHJemison]

Re: The solar tax credit shown on the  tac credit form is $5500 dollars and they are holding the remaining credit of $17,000 dollars until next years taxes. Why are they holding the one portion?

[MinhT1]

@MHJemison

As @ColeenD3 said above, the solar tax credit is non-refundable.

It can only lower to the tax liability to 0. The excess credit will be carried forward to future tax years.

[NMS3417]

How do I get the credit to carry over?  I had the same issue as the other person who wrote in.  I went back and took out the solar credit.  My tax liability went back to showing that I owed $9767 in federal taxes.  I put back in the amount I paid for the solar (which included the roof), and my federal tax went to a CREDIT of $7228.  It should have gone to 0.  If I'm doing the math correctly, I should have a 0 federal tax payment for this year, and a $7,133 credit carryover for my 2022 taxes.  Assuming I can figure out how to zero out my federal tax liability for 2021, do I just make a note that I have a carryover to 2022? 

[Critter-3]

First the cost of a roof replacement is usually not  allowed for the solar  credit even if the cost was added to the invoice. Read this article for specifics: https://www.westfallroofing.com/blog/can-i-claim-the-federal-solar-tax-credit-for-roof-replacement-c...

Next review the actual return form 1040 lines 24 thru 31 ... did you have some withholding that is now being refunded since the credit is covering some or all of the tax bill ? 

How do I preview my TurboTax Online return before filing?

You can view your entire return or just your 1040 form before you e-file:

1. Open or continue your return.
2. Select Tax Tools in the left menu (if you don't see this, select the menu icon in the upper-left corner).
3. With the Tax Tools menu open, you can then:
   • Select Print Center and then Print, Save, or Preview This Year's Return to preview your entire return, including all forms and worksheets (you may be asked to register or pay first).
   • View only your 1040 form by selecting Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu.

[NMS3417]

Thank you for the response.  With respect to my roof, it was nearly 100 years old.  There were 3 layers of shingles over the original wood shake, and the solar panels could not be installed without a complete tear down.  The solar contractors assured me that the whole project cost was eligible for the tax credit under those circumstances.  If that's not correct, that changes things somewhat.

Secondly, I went back to my 1040, and all I see on lines 24-31 are the taxes that had been withheld.  Without the solar credit, as noted previously, the calculation was that I owed $9767.  The only thing I changed was taking out and putting back in the amount for the solar credit.  So I don't think the withheld taxes are the explanation.