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
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.
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.
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.
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?
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:
Whether the carry over of the credit for existing placements will continue has not yet been determined.
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.
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.”
@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.
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.”
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.
@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.
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!!
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!!
https://turbotax.intuit.com/tax-tips/going-green/federal-tax-credit-for-solar-energy/L7s9ZiB4D
To claim the credit, you must file IRS Form 5695 as part of your tax return. You'll calculate the credit on Part I of the form, and then enter the result on your 1040.
Instead, you can carry the credit over to tax year 2022.
OK so forgive me for being redundant, but this only tells me I can carry over remaining credit to a year that the program is in effect? IT doesn't mention anything about carrying over credit past the EXPIRATION date of 1/2024? Please forgive me ignorance- I'm truly looking for some objective answers to this. From what you just posted, I can only infer that I'm able to carry over credit without issue RIGHT NOW while the program is still active. My concern is after the expiration of 2024. I will still have remaining credit at that point. Thank you!!
@jspanos85 - unfortunately, you are asking me to prove something that does not exist. I can only prove what does exist.
If the IRS was going to sunset your ability to take advantage of the carryover credits, wouldn't one think that would have put that in writing already? Why would they surprise people later and say their tax carryover credits are worthless?
For example, for electric vehicle tax credits - they are VERY clear, you can not carry over unsed tax credits to the next year. For residential energy credits, they don't state that - don't you think they would if it were so? Otherwise, why the inconsistency?
Lastly, how many years are you expecting to take these credits? the solar credits will reduce your tax liability on Line 22 of Form 1040. Line 22 can't go below zero, which is what creates the carryover.
Thank you for that post- it was exactly what I needed to understand. To answer your question, I am installing solar int he next 3-4 months and I don't see them giving us PTO (permission to operate) until 2023. At that point, I can start claiming the credit. I will have over $15,000 of credit but we only have a liability of 6k (approximately) which will take around 2.5 years to exhaust.
This appears to be the position of the IRS as of today. There is no set time frame. However, the 2022 form 5695
has a line to rollover the excess credit from 2021. If precedent is any indication the rollover should be available through 2034 when the program expires.
The IRS hasn’t announced new rules on this yet, but in the past the federal solar tax credit could be carried over for as many years as the incentive was active. The Residential Clean Energy Credit is active until 2034, so if you install in 2022, you’ll likely have plenty of time to use it over several tax years.
This appears to be the position of the IRS as of today. There is no set time frame. However, the 2022 form 5695
has a line to rollover the excess credit from 2021. If precedent is any indication the rollover should be available through 2034 when the program expires.
The IRS hasn’t announced new rules on this yet, but in the past the federal solar tax credit could be carried over for as many years as the incentive was active. The Residential Clean Energy Credit is active until 2034, so if you install in 2022, you’ll likely have plenty of time to use it over several tax years.
I have read you can carry the credit back 3 years. Is this true?
@cymccorm wrote:
I have read you can carry the credit back 3 years. Is this true?
No. A solar credit can only be carried forward, not back.
The solar credit for your personal home can not be carried back.
The solar credit for businesses and rentals so have a carryback (I think it is only one year though).
An unused business solar property credit for property put into service in 2023 (or later) can be carried back 3 years and forward 22 years.
For solar property put into service in 2022 and back the credit can be carried back one year and forward 20 years.