Solar Tax Credit: Can I continue to roll it over PAST 2022, the year it expires?

[jonathanwb1]

Hi,

Thinking of installing Solar panels on my home. At the current 26% rate, we would receive a tax credit of around $8,000. The credit is set to expire in 2022 for residential owners, and last year we only paid $1,400 in taxes (and expect to be at that level for many more years)

Therefore, I would need several more years of rolling it over to take full advantage of the $8k credit. After 2022, will I be able to do that?

Thanks 

[VictoriaD75]

Yes, the unused credit will carry forward to future years if you tax liability limits the amount this year. However, it is not yet clear whether you can carry unused credits to years after the solar credit expires. The IRS has not made a determination on this issue. 

Federal Tax Credit for Residential Solar Energy

[jonathanwb1]

Thanks Victoria. Just to be clear, it sounds like the answer is "no", I can't take the credit after 2022, because it expires that year? Correct?

If that's the case, I'll only have 2 tax years left to use the credit ($8k) towards my taxes... 2021 and 2022.  Not a great scenario in my case given my income and the limited taxes I pay. 

[AmeliesUncle]

There is no indication that the credit expires in 2022.  As of now there is no credit for property that is "placed in service" after 2021, but that does NOT mean the carry forward credit expires.

[jonathanwb1]

So you're saying if I get solar NOW in 2020, (and get the 26% ITC credit), I'll be able to "carry forward" the credit to future tax years? Even years past 2022, when buyers of Solar THEN don't get credits?

[VictoriaD75]

That is the area of the tax law regarding this issue that is unclear. Beginning in tax year 2022, the credit is not available to taxpayers, with a reduction in the credit leading up to that date. Per the IRS:

The residential energy efficient property credit allows for a credit equal to the applicable percent of the cost of qualified property. Qualifying properties are solar electric property, solar water heaters, geothermal heat pumps, small wind turbines and fuel cell property. Only fuel cell property is subject to a limitation, which is $500 with respect to each half kilowatt of capacity of the qualified fuel cell property. Generally, this credit for alternative energy equipment terminates for property placed in service after December 31, 2021. The applicable percentages are:

1. In the case of property placed in service after December 31, 2016, and before January 1, 2020, 30 percent.
2. In the case of property placed in service after December 31, 2019, and before January 1, 2021, 26 percent.
3. In the case of property placed in service after December 31, 2020, and before January 1, 2022, 22 percent.

Whether the carry over of the credit for existing placements will continue has not yet been determined. 

[AmeliesUncle]

I don't see what is unclear.  There is NOTHING in the Code that indicates the carryover credit expires.  The "applicable percentage" for the original credit is based on the "placed in service date", not when the residual credit is used.

Obviously things could always change, but as of now, the Code has NO indication that it would expire.

[kaitybyrd]

I’m in this exact situation. My take on it is this: why would the language in the tax code allow you to carry it forward for *twenty years* if the credit for solar systems placed in service before 2024 was set to expire along with systems installed post-2023? The entire length of the Federal Solar Tax Credit (enacted in 2005) is currently looking to be less than the 20 years cited in the text. Seems pretty clear to me they will grandfather in the rolled over tax credits owed for the 20 years after the credit is claimed. I’m no accountant but it only seems logical. Would love to hear more from an “expert.”

[AmeliesUncle]

---

@kaitybyrd wrote:

why would the language in the tax code allow you to carry it forward for *twenty years* 

---

It does not say anything about 20 years.

But as I said above, nothing says that it expires.

[kaitybyrd]

Oh shoot, you’re right. 20 years is for *commercial*. So how long do homeowners have to carry forward their solar tax credit...? Why isn’t this laid out more clearly? Ugh.

TaxSlayer said: “If you have a carryover from 2019, you may claim the amount on the 2020 return and carryforward any unused amount to the 2021 tax year per the Taxpayer Certainty and Disaster Tax Relief Act of 2019.”

[LauraKuhs]

Hi Victoria, I'm wondering if you're familiar with any more current guidance on this topic?  Looking to put solar on my home this year, wondering if I will be able to carry over the tax credit past 2023 when the credit is currently set to expire.  Thanks so much for any insight.

[NCperson]

@LauraKuhs - once you've installed the solar, you've earned the credit based on the year the equipment was installed.  It does not matter that the future year is a lower tax credit. 

THEN, the issue is whether you can take the credit or have to roll it over until future years - you never lose it.   

Look at line 22 on your 2021 Form 1040 - THAT line can never go below zero, so the solar tax credit can reduce Line 22, but not below sero.  Whtever is left over is the carryover to a future year. 

[jspanos85]

Hello! I am also completely stumped by this question. Is there any added clarity over the years on wether or not we can continue to claim left over credit beyond 1/2024 expiration? It's been impossible to find any answers on this and I'm trying to find an answer before I approve installation for solar at my residence. Please help!! Thank you!!

[NCperson]

@jspanos85 - scroll up and look at my post above

[jspanos85]

So I assume from what you wrote, one can continue to claim the remaining credit AFTER the expiration of the federal tax credit on 1/2024. I read your post but was still unsure. Can I ask how you got this information? I'm sorry, just want to be certain before I sign on the dotted line!!