Unable to get solar tax credit

[Urpaltuck]

Hi all. I’m finishing up taxes and put in my information for the solar tax credit after getting solar last year. Before putting this in I owed around $3400 federal. My tax credit is just below $6400 for ITC. However it is only letting me claim $1900/$6400 this year. Why is this? This isn’t how they state it’s use in any text I’ve read. 

[Critter-3]

Which other credits are you claiming ?   Other non refundable credits and some refundable ones must be used up first to allow for the solar credit to be carried forward. 

[CSKcpa56]

Not sure what your tax situation is. There is a worksheet in the instructions for Form 5695 which lists out the ordering of the credits. Your tax liability is reduced by a number of credits before the limitation of the solar credit is applied. You probably will see a credit carryforward on the return. 

[AmeliesUncle]

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@Urpaltuck wrote:

 Before putting this in I owed around $3400 federal. 

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One thing to look at is your INCOME tax on line 16 of Form 1040.  The residential solar credit is only applied against income tax, not other taxes (such as self employment tax or other taxes).

[Urpaltuck]

Mortgage Interest, Property Taxes, Car Registration, Self-Employed Sick Leave, Sales Tax

[Urpaltuck]

yes, there is a credit carryforward showing but is there a way for me to report more income with less deductions/credits to offset my taxes to $0? or what route would you take, if possible, to reduce taxes to $0?

[JohnW152]

The IRS has a specific order in which credits are to be applied to offset tax.

They’re applied to tax in this order before getting to your residential energy credit.

1. Foreign Tax Credit (Form 1116)

2. Nonrefundable child tax credit or credit for other dependents from Schedule 8812

3. Credit for child and dependent care expenses from Form 2441

4. Education credits from Form 8863, line 19

5. Retirement savings contributions credit. Attach Form 8880 

6. Residential energy credits. Attach Form 5695 and, 

So, if your taxes are completely offset at this point by the time you get to residential energy credit, you have no tax for this credit to offset.  It would carry forward to next year.

And, just as an FYI, Mortgage Interest, Property Taxes, Car Registration and Sales Tax are deductions you can claim when you itemize.  These can lower your taxable income.  They’re not credits, which lower your actual tax on a dollar-for-dollar basis.

[Kaybru20]

Same thing happened to my friend…He got his solar last year,. He was also told he would get a rebate that can be applied toward taxes or applied to come off the price of the solar system he leased…He did taxes 3 weeks ago and has to pay fed taxes of 4300 and state taxes 345.00…His accountant said they have to see what he earned before applying the rebate??????When he had the system installed last year the installer told him he could apply the credit to taxes, recieve a check or apply the rebate to pay toward the solar bill on the cost of the system..He lives in RI….He hasn’t paid Fed taxes for awhile now so don’t understand why 4300? I guess he is trying to get ahold of the installer to find out what’s up with it…Starting to think it’s all a scam..Doesn’t make sense…At least you got to make out a form on your taxes, I don’t think his account did!

[Vanessa A]

The credit is a real credit, however salespeople are being sales people and not giving you all the details to get the credit.  There are a LOT of people who will not benefit at all from the credit because they do not have a tax liability to apply the credit against.  

Basically, it comes down to every persons tax situation is different.  Different income, different credits, different deductions, just different.  So, if a sale person is telling you, you WILL get something something tax wise and they haven't done a thorough analysis on your tax situation and they are not tax experts, do not rely on what they are telling you without checking in further.  

There are also reasons that you could still have a tax liability but not get the credit and one would be Self-Employment taxes.   A non-refundable credit will not offset something like SE taxes.  So again, everyone has a different situation, so it is impossible to make a flat statement that someone will or will not qualify for a credit without having many details.  Small details can make a difference.