Energy Efficient Home Improvement Credit and Residential Clean Energy Property Credit

[lindan86]

Hi, I would like to install solar energy in my primary residence in 2023. I know that I might be entitled for a credit of 30% of the sum of amounts paid. Is there any income requirements to be qualified for the credit? If so, would capital gains on rental property sales be counted as part of the income calculation when claiming the credit? Thanks. 

[MinhT1]

There are no income requirements for the credit. And there is no upper dollar limit on those solar expenses.

But please note the the solar credit is non-refundable. It can only reduce your ta liability to zero but will not be refunded to you. Any unused portion can be carried forward to future tax years.

[Opus 17]

The credit can reduce your tax liability, but it can't be refunded if your tax liability is used up by other credits or deductions.  For example, if you made $5000 in withholding and payments, and you owed a further $1000 when you file your return, your liability for the year was $6000.  Or, if you made $5000 in payments and withholding, and get a $1000 refund, your liability for the year was $4000.

Anything that increases your income tax owed is something that the credit can be used against.  That would include capital gains from the sale of property.  In fact, if you plan a large solar credit, it can be a good strategy to find ways of temporarily increasing your taxable income to take advantage of the credit -- like selling assets, or converting traditional IRAs to Roth IRAs.

The only tax that can't count against the credit is self-employment tax.