We had solar panels installed on our home this year. I know that the Solar Energy Tax credit is a non-refundable tax credit and that it can be carried over into following years if there is any remaining credit after doing your taxes, but I am not entirely sure exactly how this all will work out when it comes to tax time.
Say when we do our taxes we find out that we owe $5,000 in federal taxes, we paid $5,500 in federal taxes through out the year via our paychecks, and we have $5,000 in solar energy tax credit. Would that mean that because our federal taxes are $5,000 and we get a credit of $5,000 for the solar that we get a refund for the $5,500 that we paid in federal taxes, or does it mean we only get $500 in a refund for over paying our federal taxes and we get to carry over the $5,000 tax credit into the next year?
I understand that the solar tax credit is non-refundable, what I cannot find an answer to is the difference between what is owed, what credit we get, and what I have already paid and how a refund would work in that scenario.
