I bought solar panels, but I don't ever have a tax...
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New Member

I bought solar panels, but I don't ever have a tax liability

I feel like I may have been victimized by predatory sales and lending practices. The system cost about $25,000. I was sold on what I thought would be a $7-$8,000 refund I would get in addition to the $5-6,000 I normally get each year from the IRS.

 

I bought the panels with a loan. The loan has an introductory period, where you only pay on like $16,000 of the loan, and if you don't give them the $8k within 18 months the loan goes up to the full amount, and the payment goes up as well. That makes it so that my loan payments on the panels cost more than my electricity did before solar, so that makes going green a luxury for those who make much more money than I do.

 

So, I'm trying to figure out how to get that money. I've been thinking that maybe there's a way I could do my refund this year that would give me that additional rebate, but that would give me a tax liability next year that would be covered by the solar panels. However, I don't know how to do that without maybe committing fraud, which would get me in big trouble and possibly have to pay more, and maybe lose my job as well.

 

I'm a disabled war veteran. I'm also looking for legal help to get out of the contract, as I feel like I was scammed.

11 Replies
Level 11

I bought solar panels, but I don't ever have a tax liability

"Tax liability" does not mean that getting a refund disqualifies you.  It means your income tax BEFORE withholding and tax credits.

 

For example, let's your tax return shows $10,000 of income tax, but you had $15,000 withheld from you paychecks, resulting in a refund of $5,000.  In that case, the Solar Credit is applied against the $10,000.

 

So in that example, your $7,000 Solar Credit would reduce your 'tax liability' to $3,000.  You would still have had $15,000 withheld from your paychecks, so now your refund will be $12,000 (rather than $5,000).

 

Does that make sense?

Level 14

I bought solar panels, but I don't ever have a tax liability

To explain it another way:

 

The solar tax credit is not a refund.

It is a credit against your federal income taxes due.

If you have a solar credit of $7,000 and your federal taxes due are $10,000, the credit would reduce your tax bill to $3,000.

If you have a solar credit of $7,000 and your federal taxes due are $5,000, the credit would reduce your tax bill to zero, and you'd have $2,000 of unused credit to use on your return the following year.  You would not get a refund of the unused credit.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.**

New Member

I bought solar panels, but I don't ever have a tax liability

Thank you for your time.

 

I guess this confused me because I plugged this into the tax software, and it's showing that I'll get the full amount of solar credit for next year, meaning all of it carries forward and won't be of use to me.

New Member

I bought solar panels, but I don't ever have a tax liability

Ok, I called a tax place, and they told me that if I do a standard deduction it won't count my solar tax credit, have to itemize to put that to use.

Level 15

I bought solar panels, but I don't ever have a tax liability


@weezerwookie wrote:

Ok, I called a tax place, and they told me that if I do a standard deduction it won't count my solar tax credit, have to itemize to put that to use.


Whomever you spoke with is incorrect.  Whether you use the Standard Deduction or Itemized Deduction (Form 1040 Line 9) is not relevant to the Residential energy credits.  The credit is from Form 5695 and the amount of the credit flows to Schedule 3 Line 5.  The total from Schedule 3 flows to Form 1040 Line 13b.

 

Click on Tax Tools on the left side of the screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.

Level 11

I bought solar panels, but I don't ever have a tax liability

Weezer - That is NOT true.
That "tax place" either misunderstood what you were saying, or is completely wrong.

Expert Alumni

I bought solar panels, but I don't ever have a tax liability

Yes you are eligible for the Residential Energy Credit.   The amount of your credit allowed is limited to the amount of your remaining liability.  If the remaining tax liability is less than your credit amount, any amount not used to bring your tax liability down to zero, will be carried forward to the next year.  Use Form 5695 to claim the credit.

 

The good news for you is that you are eligible for the Energy Credit and with the ability to carry it forward to future years will help with your tax liability then as well.  

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New Member

I bought solar panels, but I don't ever have a tax liability

I have zero tax liability this year, but $1848 in taxes due to various jobs that paid direct without withholding tax. So I have a self-employment tax burden. My Form 5695 results in a $9K balance on line 16 for the big solar array and support equipment we installed toward the end of 2019. 

 

All of it is carried forward to 2020 as it is applied to my taxable income, not my actual tax burden. I did think it was a bottom line deduction (unless it was penalties).  I feel a bit naive that I figured we would be tax free this year (2019).

Employee Tax Expert

I bought solar panels, but I don't ever have a tax liability

Unfortunately, the solar credit is a credit against federal income tax, not self-employment tax (which ends up going to the Social Security Administration).

 

I doubt that the solar panel salespeople understand the difference. And no one should take tax advice from solar panel salespeople or roofers and anyone who is not a tax professional. Hopefully you will make a lot of money in 2020 so you can use the credit.

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Level 15

I bought solar panels, but I don't ever have a tax liability

Sounds like there was miscommunication between you and whatever CPA you talked with. First, you need to understand a few terms.

A Tax Credit is a dollar for dollar reduction in your tax liability. So if your tax liability before the credit is $10,000, the credit reduces your tax liability dollar for dollar to $3000.

A Tax Deduction reduces the amount of income you pay taxes on. So if you have $100,000 of income taxed at 10%, that means your tax liability is $10,000. But if you have a $10,000 tax deduction, that reduces your taxable income from $100,000 to $90,000. Then your tax liability would be $9000.

With that said, what you get for your solar panels is a tax credit. Therefore, if you get a $7000 tax credit, and your tax liability for 2019 before the credit is $5000, that means you pay no taxes at all for 2019. The remaining $2000 of credit is carried over to next year.

For your business income, you *WILL* pay the self-employment tax which is 15.3% of your taxable business income. The self-employment tax is basically the employer side of your social security and medicare. So in a sense, you are paying your future self for your social security pay and medicare coverage you will have when you reach retirement age and apply for Social Security and Medicare.

So the bottom line is, with your SCH C income you "WILL" pay taxes - buy only the employer side of the self-employment tax.

 

Level 15

I bought solar panels, but I don't ever have a tax liability

To use up the credit you need to increase your taxable income ... convert an IRA to a ROTH, sell some stock, increase your wages or self employment, take a pension or IRA distribution.  Otherwise you may never use up the credit if your only income is SS benefits.   

 

Sadly I doubt there is much you can do about the fix you are in ... read the contracts carefully and/or seek local legal council. 

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