Can anybody confirm that Tentative Min Tax can limit taking solar credit?

[EVNIII]

It seems I cannot take solar credit.  Credits are adjusted through Schedule 3 and form 8801 to keep the form1040 line 22 tax at the Tentative Minimum Tax on form 6251, line 7. I can zero out the solar investment and the only thing that changes is the 8801 credit carryforward.

Can anyone confirm that use of the solar credits is supposed to be limited by minimum taxes?  Thank you.

[PattiF]

Yes, the solar credit is limited by the amount of tax liability. The solar credit is a non-refundable credit meaning that it is limited by the amount of tax liability shown on your tax return. Once this credit, or any other credit with higher priority than this one, uses up your liability and reduces it to $0, you can't get any more credit on this year's tax return. Credit that you can't use on this year's return can be carried forward to later years.

[EVNIII]

Thank you.  I'd like your answer better if my tax liability wasn't over $40k.  There's plenty of room for a $2,188 credit.  The issue is that the tax code as implemented by TurboTax adjusts the usable solar credit as necessary to keep the tax obligation at the "Tentative Minimum Tax" on Form 6251, line 9.

[Vanessa A]

Do you see a net difference in your refund when you enter the credit versus when you do not? 

The Solar tax credit can be used against the AMT.  

What do you see on Schedule 3 line 5?  Are you seeing the full credit?

[EVNIII]

Entering/removing the solar cost does not affect my refund.  

My Schedule 3 line 5 has the full credit (2,188 = 26 % of solar cost). 

Note, Schedule 3 line 6b has a credit for prior year minimum tax.  If I remove the solar cost/credit, line 5 goes to zero, but 6b goes up by the amount of the solar credit.  Schedule 3 line 8 stays the same.

Does this help explain what's going on?

[DawnC · Accepted solution]

Yes, you have a AMT carryover credit on Line 6b.   You need to look at Form 8801.   TurboTax is giving you the solar credit, but the solar credit is reducing the credit for paying AMT in a previous year on this year's return. 

You are not subject to the AMT this year if you are getting a credit on Form 8801.    The solar tax credit can be used to lower AMT,  but the solar credit is removed from the credit for prior years AMT (Line 6b of Schedule 3).   

If you look on Form 8801, Line 22, it is pulling your current tax liability minus allowable credits.   The Line 22 instructions remove credits on Schedule 3 when calculating the amount of credit you can take on Schedule 3, Line 6b.  

'''Add the amounts from Form 1040, 1040-SR, or 1040-NR, line 16 and Schedule 2 (Form 1040), line 2. Subtract from the result the total of any credits from Form 1040, 1040-SR, or 1040-NR, line 19 and Schedule 3 (Form 1040), lines 1 through 6z (not including any credit for prior year minimum tax on line 6b.'''

Can I claim the AMT (Alternative Minimum Tax) credit?

[EVNIII]

Thank you.  Great answer, that's exactly what's going on: the credit I can take in any year is limited.  If you have a substantial carryforward then it may be awhile before the solar credit affects your taxes.  Thank you again.