HOME ENERGY CREDIT - SOLAR PANELS

[Elegija77]

We installed solar panels in 2023. Why I cannot get my home energy credit for 2023, but my entire credit is carried forward to 2024? 

[MayaD]

The credit is nonrefundable, it can't exceed the amount you owe in tax. The credit can't be used to increase your tax refund or to create a tax refund when you wouldn't have already had one.

You can carry forward any unused credit, and apply it to reduce the tax you owe in future years.

[Elegija77]

Maya, I do not think that TurboTax is calculating this credit correct way. TurboTax is not eliminating my tax liability the way they should... Let's say my final taxable income is $60k and I owe 22% as per law. That equals a $13,200 tax liability. The credit then covers all those taxes and $13,200 ++++ they took out of my paycheck throughout the year is refunded back... It seems like turbotax is not doing that. TurboTax is trying to give me my refund like normal without eliminating my tax liability. Please look in to this. Thank you, 

[DoninGA]

@Elegija77 You need to look at the Form 5695, Schedule 3 Line 5a and Form 1040 Line 20.

Click on Forms.  In Forms mode locate the Form 5695 on the left side of the screen.  Click to open.  Review the amounts shown on the form particularly Lines 14, 15 and 16.

Then Schedule 3 Line 5a and finally Form 1040 Line 20.

[Vanessa A]

Look at line 16 on your 1040, then also look at line 24. If the amount on line 16 is less than the full credit, then this is the maximum amount of the credit you use this year will be that number.  If you have other credits, that may also reduce the tax liability, this may also reduce the amount of the credit you receive.  The second page of your 1040 will explain how your refund is calculated.

At $60,000 you are not paying $13,200 in federal taxes.  If you are single and your AGI is $60,000, your tax would be $8,513 per the tax table for 2023. This is the amount that the credit applies to.  So this credit, along with any other credits you have that are non refundable are then subtracted from the $8,513.  If you have other credits that are not able to be carried forward, these will also reduce the amount of the credit you would get.  For example, if you have the Other Dependent Credit, this would lower your tax liability to $8,013, which would limit your credit to $8,013.  Then say your total credit with your carryover from last year and anything you may have added this year is $11,000.  This will reduce your tax liability to $0.  But you will still have a remaining credit of $2,987 to carry over to next year.

If your employer withheld $10,000 from your wages, you would get a $10,000 refund because you have no tax liability.  Your withholdings do not play a factor into the amount of the credit  you can get in a particular year.  The credit simply allows you to get more back of what you paid in during the year.  If you didn't have the credit, in the above scenario, you would have a refund of $1,987 instead of the full $10,000.

 If you look on line 16 of your form 5695, this will show any eligible carryforward, but as stated, they are ONLY for the residential energy credit, not the Energy Efficient Credit. 

[Elegija77]

I checked the form and line 14 and 15 shows 0, line 16 the entire 30%. We are married and filing jointly. We do have tax liability but does not seem like TurboTax pulling those amounts.... 

[DawnC]

The credit is nonrefundable, so the full amount is carried over to next year.     Line 14 is the max credit you can take based on your tax liability.   If you look on line 22 of your Form 1040, your tax liability should be zero.    Preview Form 1040