solar Energy Tax Rebate

[SLYKTAX]

I bought all my solar hardware for my solar project in 2023 and finished my project only in January 2024 (Utility approved PTO). 

I didn't claim my tax credit on my 2023 Tax Return and will be doing for 2024. 

As I am going to get about $5,000 tax credit, as I also has RMD to take and trying to roll some of my IRA into my Roth. 

I have to figure out how much I can safely roll from my IRA to Roth as I do not want to have my AGI exceeds the threshold that would raise my Medicare Part B premium. 

It may be hard to figure out how much my 2024 AGI would be.  Is it possible that I claim partial solar energy tax credit in 2024 and the remainder for 2025 to my tax advantage? 

[JotikaT2]

No, the energy credits can only be taken in the year the eligible improvements were made.  

However, if you do not have enough of a tax liability to use up the entire credit, it will be carried forward to next year until it is utilized.  This is because the Residential Clean Energy Credit is a nonrefundable credit.  It can only be used to offset the tax liability shown on your tax return.  

Please see this link for more details on the potential energy credits available.

[NCperson]

the solar energy credit is not going to affect you AGI, so either I am not following your concern or you are not thinking about this correctly.  

IRMAA is generally based on Line 11 of your tax return; the tax credits come into play much further down the form than that.  

this is an excellent website to assess the IRMAA impact - 

https://thefinancebuff.com/medicare-irmaa-income-brackets.html

[SLYKTAX]

Thanks for the explanation.  I believe capital losses of $3000 is the maximum that I can claim a year to reduce my AGI and IRMAA then.   

Suppose I do have capital loss carryover from prior year but I have capital gain of $3,000 for the year, that would even out with $3,000 from carryover losses .  Don't you think it is better in this case, to do tax harvesting by selling one that has a loss say, $3,000 or so too?  That way I can use capital carryover loss of $3000 to bring my AGI down by $3,000?  Am I right?

[NCperson]

@SLYKTAX yes that strategy can work, but remember, the IRMAA cutoffs are 'cliffs', so unless you get yourself below one of the cliffs, it won't matter.  However, your strategy would permit you to roll an additional $3,000 from Trad to Roth. 

these are estimates of 2024 AGIs that will impact IRMAA in 2026.  It is developed using an assumption of 0% inflation and 3% inflations.  

personally, my strategy is to determine the highest marginal tax rate and the highest IRMAA I am willing to pay and then do enough Roth conversions so I am just below the top of marginal tax bracket or just below the IRMAA cliff. 

Part B Premium 2026 Coverage (2024 Income)0% Inflation 2026 Coverage (2024 Income)3% Inflation

Standard	Single: <= $107,000 Married Filing Jointly: <= $214,000 Married Filing Separately <= $107,000	Single: <= $110,000 Married Filing Jointly: <= $220,000 Married Filing Separately <= $110,000
1.4x Standard	Single: <= $135,000 Married Filing Jointly: <= $270,000	Single: <= $138,000 Married Filing Jointly: <= $276,000
2.0x Standard	Single: <= $168,000 Married Filing Jointly: <= $336,000	Single: <= $172,000 Married Filing Jointly: <= $344,000
2.6x Standard	Single: <= $202,000 Married Filing Jointly: <= $404,000	Single: <= $206,000 Married Filing Jointly: <= $412,000
3.2x Standard	Single: < $500,000 Married Filing Jointly: < $750,000 Married Filing Separately < $393,000	Single: < $500,000 Married Filing Jointly: < $750,000 Married Filing Separately < $390,000
3.4x Standard	Single: >= $500,000 Married Filing Jointly: >= $750,000 Married Filing Separately >= $393,000	Single: >= $500,000 Married Filing Jointly: >= $750,000 Married Filing Separately >= $390,000

[SLYKTAX]

Again thank you very much for the info and advice as I have to explore then time when I have to roll my Trad to Roth so that I don't get into an IRMAA cliff for a lesser benefit.

I will look at what you have provided.

I never knew about the IRMAA and the first time I need to pay extra was also the first time my wife & I signed up for Medicare Part B.  We were not prepared for that to happen when I had my wife cashed out from her 401K prior year and had our AGI exceeds by just $400 for IRMAA.  Lesson learnt. 

[NCperson]

@SLYKTAX welcome to the club.... it is incredible how many times I find someone (and I was once one of them) who doesn't know about IRMAA..  HOWEVER, I wouldn't overly focus on it.   Think of it as a 2% additional  income tax on the margin- that is all.

Assuming you don't liquidate your entire IRA in your lifetime (i.e. some of it will be inherited), the value of the Roth conversions - because your heirs will be able to let that grow for an additional 10 years tax free - is far more valuable than the cost of paying IRMAA.    

if you attempt to avoid IRMAA, then your IRA RMDs could just balloon as you age.  Most just focus on their first RMD's being around 4% of the balance....but if you live to 90, then the RMD's will exceed 10% per year! 

IRMAA is a the tail of the dog....don't let it wag you!

[SLYKTAX]

Again. Thanks you for your foresight and advice about not trying to avoid IRMAA for the sake of future tax planning.

Indeed I am seeing our RMDs ballooning the past years like you said as we aged.

I have been telling my wife earlier: look like your money in the 401K will never dry out.  You took some last year and it grows back again. 

I shall be trying to grow our Roths instead of IRA/401K.

Thanks again for that new strategy!! You gave the best advice.

[NCperson]

Also, be sure any bond investments are primarily in your 401k / trad IRA while any equity investments are primarily in the Roth and after tax portfolio.  that will slow down the growth of the 401k/ trad IRA without changing the returns on your overall portfolio. 

[SLYKTAX]

Thanks