Trying to get 35% Hawaii tax credit for installing solar PV panels in 2019. Total cost $31,864. I'm not getting full refund when putting numbers. Whats wrong?

[DianeC958]

The credit for Hawaii is capped depending on your circumstances at $2,250 or $5,000.

Link to Cap on solar credit for Hawaii

[psberg2]

You need to find out how many KW are in your system.  This information should be in the sales estimate provided by your salesperson.

After you get this information, you need to compute a cost per KW.  If, say, your system has 8 KW, divide the $31,864 by 8, = the cost per KW.  In this example, the cost per KW is $3,983.  

If you have 8 KW, you have 2 systems--the first is 5 KW, and the second is 3 KW.  (Each system is "capped" at 5 KW.  You need to file one N342 per "system", meaning you need to file 2 forms.  Multiply the first system (5 KW) by the cost per KW, and your number is $19,915.

For the first system, take the $19,915 cost and multiply by 35%, which gives you your tax credit.  Here, it is $6,970.  However, you are capped at $5,000 credit, so your credit is reduced accordingly.

Same exercise with the remaining 3 KW.

I just did this exercise with my newly installed PV system, where I actually had 4 systems.  The Hawaii tax credit system for PVs is unduly complicated.  I found a YouTube video (do a Google search) which I found very helpful.  It is very elementary, but go through the calculations and you will "get" it. 

[HI808TTax]

@psberg2 explained the calculation of the credit perfectly.  Most importantly, they explained that the calculation is split into "separate" systems.  Although you signed one contract, based on psberg2's example, there are actually two separate systems for tax credit purposes.  This is very important because if the taxpayer just calculated 35% off of the $31,864 you'd get $11,089 and then it would be reduced to the capped amount of $5,000.  The problem here is that without separating the 8KW systems into two (5KW + 3KW), the taxpayer in this example would be missing out on the second calculated credit of $4,182.  This is calculated from the "second system" consisting of 3KW.  The remaining $11,949 ($31,864 - $19,915) multiplied by 35% = $4,182.  The taxpayer's credit will now total $9,182 instead of just $5,000!

I would warn Turbo Tax users that Turbo Tax does not automatically do this for you.  I entered in $38,304 as my total cost and 7.48 KW as the output capacity.  Turbo Tax calculated a TOTAL credit of $5,000.  It didn't give me the additional $4,445 from my "second system".

In order to get your full tax credit, you need to calculate your separate systems yourself and enter them individually into Turbo Tax as separate systems to get your full credit.  The Hawaii Tax Department has a great PDF worksheet that will do this for you.  Go to <https://files.hawaii.gov/tax/geninfo/info/Calculation_of_Output_Capacity.pdf> and the worksheet will allocate your cost per system.

Hopefully Turbo Tax sees this and realizes that they need to update their program to address this deficiency or else their customers could be losing THOUSANDS of dollars in tax credits.