We installed solar panels in 2021 with the understanding that 26% of the costs could be applied as a tax credit and as a tax credit it only reduces or zeros out any money I may owe in taxes this year and the next several years, and any money I may have owed last year. Yet, when I enter it into TurboTax it gives it all back to me as a refund this year even though I was already due a refund. So what is the correct way this tax credit is applied? Can I get it all back as a refund this year or do I need to wait to cancel out taxes I may owe in future years?
The solar credit is a non-refundable credit and can help reduce your tax liability to 0. Any excess will be carried forward to future years.
The fact that you have a refund does not mean that you do not have a tax liability. A refund means that your tax withheld and any other refundable credits (such as the EIC) are greater than your tax liability. In this case, your solar credit will be applied against your tax liability and will increase your refund. The calculation made by TurboTax is correct.
Let me ask for clarification. Sorry if I'm a little slow. Before I put in the solar panel credit I was getting a refund of $38. After I entered the solar panel information TurboTax showed I was getting a refund in the thousands. Am I getting the thousands back this year OR am I getting the $38 and applying the rest of those thousands to future years that I may owe?
@Jackostax - here is how it works: the solar credit can reduce Line 22 of Form 1040 only as far as zero. Whatever is remaining is carried over to next year.....