The IRS has a specific order in which credits are to be applied to offset tax.
They’re applied to tax in this order before getting to your residential energy credit.
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Foreign Tax Credit (Form 1116)
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Nonrefundable child tax credit or credit for other dependents from Schedule 8812
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Credit for child and dependent care expenses from Form 2441
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Education credits from Form 8863, line 19
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Retirement savings contributions credit. Attach Form 8880
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Residential energy credits. Attach Form 5695 and,
So, if your taxes are completely offset at this point by the time you get to residential energy credit, you have no tax for this credit to offset. It would carry forward to next year.
And, just as an FYI, Mortgage Interest, Property Taxes, Car Registration and Sales Tax are deductions you can claim when you itemize. These can lower your taxable income. They’re not credits, which lower your actual tax on a dollar-for-dollar basis.
