Incorrectly Calculating Solar Credit

[Grilly52]

When I enter the cost of my solar installation, instead of taking my tax burden to $0, it actually credits me the large balance.  It should be a carry forward to next year but instead is showing I have a return this year.  Thoughts?

[DaveF1006 · Accepted solution]

Yes, this is a rare phenomenon because it seems like it is giving you a refundable credit. Perhaps we need to explore certain line items on the 1040 to see if the credit is being applied correctly.

1. Look on your 1040 and compare lines 18, 20,and 24.
2. Line 18 should show an amount of tax liability before the solar credit was applied.
3. Line 20 should show the amount of the solar credit. There may be other credits that were reported form Schedule 3.
4. Line 24 should be the result of subtracting credits and adding additional taxes from Schedule 2, which appear on line 23.  
5. Check to see if the full amount of the credit is applied on line 20.
6. Also check line 24 to see if that amount has a balance. If it does, then this was calculated correctly. if it is zero, check the math in the line above line 24 to see if the calculations are correct.

[Grilly52]

That's very helpful, I think I was thinking about it reverse.  I was looking at total tax burden and subtracting what we paid in taxes THEN applying the solar credit which led me to believe I'd have a carry over to 2023.  I assume the solar credit comes first then you credit taxes paid which is pushing me to a refund.  

[Critter-3]

Yes ... you did have it backwards ... what you had withheld is on the form 1040 AFTER the credit was applied so if you have zero in taxes and paid in $XXX  then you will get the entire withholding back in a refund.  The form 1040 is really a long math problem worked in order from line 1 to 37 ... the order cannot be changed.