I make very little (26.5k), therefore I don't pay a lot in taxes and I get a refund check every year. I'm not sure what other information would be relevant but I will try to add it if it's needed for an answer.
I'm basically just trying to figure out how the solar tax credit will work in my exact situation.
Thank you.
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The Residential Energy Credit or solar panels (I assume that this is what you mean) is - for 2020 - 26% of the qualified expenses for the solar panels. It was 30% for tax year 2019, 26% for tax year 2020 and 22% for tax year 2021. After that, the credit may expire, depending on what Congress does. See https://www.irs.gov/newsroom/energy-incentives-for-individuals-residential-property-updated-question...
The credit is a non-refundable credit. That is, it can reduce your tax to zero, but not below that.
In your case, let's say you have your tax assessed at $1,000 (totally made up number). You normally withhold more than $1,000, let's say $1,500, so your refund would normally be $500.
If you got the residential energy credit for, say, 26% of $10,000 in qualified spending, that would be $2,600 in a credit. Your tax would be reduced from $1,000 to $0, and $1,500 of your withholding (i.e., all of it) would be refunded to you.
Any credit that was not used ($1,600) would be carried over to next year. So you could apply the carryover to the next year under the same rules.
NOTE: it is not yet known if Congress will allow the carryovers past 2021.
Clear?
Yes that explains exactly what I was looking for. Thank you so much!
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