@psberg2 explained the calculation of the credit perfectly. Most importantly, they explained that the calculation is split into "separate" systems. Although you signed one contract, based on psberg2's example, there are actually two separate systems for tax credit purposes. This is very important because if the taxpayer just calculated 35% off of the $31,864 you'd get $11,089 and then it would be reduced to the capped amount of $5,000. The problem here is that without separating the 8KW systems into two (5KW + 3KW), the taxpayer in this example would be missing out on the second calculated credit of $4,182. This is calculated from the "second system" consisting of 3KW. The remaining $11,949 ($31,864 - $19,915) multiplied by 35% = $4,182. The taxpayer's credit will now total $9,182 instead of just $5,000!
I would warn Turbo Tax users that Turbo Tax does not automatically do this for you. I entered in $38,304 as my total cost and 7.48 KW as the output capacity. Turbo Tax calculated a TOTAL credit of $5,000. It didn't give me the additional $4,445 from my "second system".
In order to get your full tax credit, you need to calculate your separate systems yourself and enter them individually into Turbo Tax as separate systems to get your full credit. The Hawaii Tax Department has a great PDF worksheet that will do this for you. Go to <https://files.hawaii.gov/tax/geninfo/info/Calculation_of_Output_Capacity.pdf> and the worksheet will allocate your cost per system.
Hopefully Turbo Tax sees this and realizes that they need to update their program to address this deficiency or else their customers could be losing THOUSANDS of dollars in tax credits.
