Standard Deduction vs Itemized Deductions and the Impact on Solar Energy Credits

[jchirumbolo]

I am retired with moderate fixed income and expenses. I started working on my 2022 tax return. After entering income and expenses, I started exploring taking the standard deduction versus using itemized deductions and the impact on any credit I may be allowed from installing PV Solar Panels on my home in 2022.

Based on my income, using the standard deduction TurboTax shows I have no tax liability, so I am not eligible for any solar credit. Using itemized deductions, which are a third less than the standard deduction, I do have a tax liability. This liability is offset by a portion of the solar credit for 2022 with the rest rolling over for future years. In both cases, I get a refund for the same about based on money I had withheld throughout the year.

Itemized deductions seem to be the way to go. This allows me to utilize at least a portion of the solar credit. Is this approach allowable under IRS rules? 

Thank you for whatever help or direction you can provide.

[Critter-3]

Well I would not just use the itemized deduction when you don't need to do so ... it is a waste for the unused portion of the credit  that will carry forward.  I would find a way to increase my income to use the credit up ... convert some IRAs to ROTHs  or sell some stock or even win the lottery.  Maybe a family member has stocks they can "gift" you for you to sell  then "gift" back the proceeds. Be creative.  

[SteamTrain]

Well, first make sure you've entered all yoru possible itemized deductions...state taxes paid in 2022, withholding Property taxes etc...to make sure it doesn't exceed yoru Std Ded.

Orherwise:

(Opinion)...No......use the Std Deduction and let the whole amount carry over to next year...meaning 2023.

Then, if you expect your itemized deductions to be the same for 2023, you can then look to increasing your taxable income above zero in ways you wouldn't normally do.

1)  Convert some traditional IRA funds to ROTH IRAs....the increased tax is then offset by the Solar Credit carryover.

2) Sell some long-held stocks or mutual funds, that are sitting on large capital gains.  The extra income and tax will be offset by the Solar Credit carried over .

Of course, this takes some careful prediction as to how much extra tax would result...but if you are somewhat conservative in the extra taxable income you generate this way, you could always end up with some leftover carryover to 2024.