For how many years can the residential solar ITC credit be carried forward? Section 48 says 20 years, other guidance says only until the program is phased out in 2024.

[ben-hefferon]

For example if I install solar in 2021 and become eligible for $10000 solar tax credit, but my total tax liability for 2021-2023 is only $3000, will I be able to claim the remaining $7000 credit in future years (past 2023).

[JotikaT2]

Yes, you can carry the excess credit to your 2021 income tax return.

Please see the link below for additional information.

Solar Tax Credit details

[ben-hefferon]

Thank you for your response, but this still does not answer my question.  My question is for HOW MANY years can unused solar tax credit be carried forward?  For example if I am eligible for a $10,000 credit but only have $1,000 of tax liability every year, can I claim $1,000 of the credit every year for the next 10 years?

[KathrynG3]

Awesome TurboTax expert @JotikaT2 provided a link for additional details which listed in the second to last paragraph that the current legislation for this credit is expiring at the end of 2023 (despite being available for a credit carryforward of up to 20 years). This credit was initially set to expire starting in 2022, but it was renewed for one more year. It may be renewed or changed in the future.

TurboTax will automatically calculate the maximum credit available based on what is entered.

To do this in TurboTax, from inside the program, enter residential energy credit in the search box and click the Jump to link in the search results.

Keep in mind that solar and wind energy efficient improvement details are not entered in the initial energy-efficient screen where exterior doors, windows, etc. expenses are entered. Continue through the screens to get to the Additional Energy-Efficient Improvements section. Report any amounts of residential energy credits that have been claimed since 2006. 

Solar electric property that was placed in service in 2020 is eligible for a tax credit of 26 percent of the costs for assembly, preparation, and installation as well as piping and wiring. If solar electric property was installed for your main home in 2019, the tax credit would have been 30 percent.

There are two types of energy property that you can place into service.

Nonbusiness Energy Property - If you placed property into service like doors, windows, insulation, water heaters, etc.:

- The maximum credit for this type of property is $500, no matter how much you spend. It is calculated as 10% of the amount paid for the property, limited to $500.

- The amount of credit allowed is limited to the amount of your tax liability. Also, this is a non-refundable credit and it is not carried forward to future years.

Residential Energy Efficient Property - If you placed things into service like photovoltaic cells, solar water heater, wind generators, geothermal heat pumps or fuel cells:

- The amount of your credit allowed is limited to the amount of your remaining liability after we have considered your residential energy property (doors, windows, etc.).

If the remaining tax liability is less than your credit amount, any amount not used to bring your tax liability down to zero, will be carried forward to the next year, as the energy credits are limited and the treatment has been adjusted a number of times since 2006 through tax law changes. 

For more information, see the 2020 IRS Instructions for Form 5695.

@ben-hefferon

[patriciacrone]

If I am interpreting your info correctly, assuming I purchase solar power this year for approximately $50,000, I will received a tax credit of about $12,800.   Since we are retired, based on our income, we pay approximately $3,000 per year.  Will we be able to roll over the $12,800 for 4+ years?

[Critter-3]

You have 20 years to use up the credit  ... but if you can raise your income you can use it faster ... take more out of an IRA, convert to a ROTH and/or  sell some stock with gains are all good ways to increase your taxes.  

[jspanos85]

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!!

[NCperson]

duplicate post 

[louvallee]

The installers are claiming 10 year. But, after reviewing the IRS website I can only confirm one year additional 

year. The 2022 form 5695 has a line for the rollover to the next tax year. 

[NCperson]

@louvallee - the credit doesn't expire....you can keep rolling it forward indefinately if you are unable to use it all.  Look at Line 18 of form 1040.  The credit can reduce the tax on that line, but can't go below zero.  The part that is left over is the rollover.

So if the credit < Line 18, there is no rollover as you will use it all. 

if the credit > Line 18, the difference is the rollover. 

[louvallee]

did you mean 2034?

[NCperson]

@louvallee - no, I meant forever...if the tax credit is not fulled used this year, you can attempt to use it next year or the next or the next; it doesn't expire.  

but it has to be used each year to reduce Line 18 of Form 1040 to zero.  see my prior post. 

[Critter-3]

So, what if the value of the Solar Tax Credit is more than you owe in income taxes? While you can’t use the tax credit to receive money back from the IRS, the Solar Tax Credit rollover lets you roll the tax credit back one year and carry the credit forward for up to five years. So, if you didn’t owe federal taxes last year, you can still claim the Solar Tax Credit on this year’s tax return. 

https://www.saveonenergy.com/solar-energy/solar-tax-credit/

[NCperson]

@Critter-3 -

The original thread discusses the Investment Tax credit, not the residential energy credit - so I wonder if there is some confusion here.  I am assuming that @louvallee is asking about installing solar on his personal residence.  

the 5695 instructions have this warning on page 1: 

"IRS guidance issued with respect to the energy credit under section 48, such as Notice 2018-59, does not apply to the residential energy credits.

so if the question is about the solar residential credits, here are my comments:

here are the 2022 instructions and form that incorporates the new tax law related to the residential tax credit;. 

https://www.irs.gov/pub/irs-dft/i5695--dft.pdf
https://www.irs.gov/pub/irs-dft/f5695--dft.pdf

1)  The credit is earned in the year of the install.   I can find no documentation that supports the credit can  be carried back to a prior tax year. 

2) Form 5695 nor the instructions makes amy menton of limits on the number of years the unused credit can be carried forward.  Even the TT article doesn't reference a limit   In fact, I can find no documentation that once the solar is installed, there is no reason the  credit can't be carried forward until death, meaning the tax liability over time is so low that  credit can't be consumed. 

https://turbotax.intuit.com/tax-tips/going-green/federal-tax-credit-for-solar-energy/L7s9ZiB4D

3)  Per the instructions, the credit   is available on  all installations through 2034.  If planning to INSTALL solar in 2035, do not assume there will be  a solar tax credit.  It doesn't mean that if an installation occured prior to 2035 and the credit wasn't consumed on a tax return, it expires. So the 10 year limit is the opportunity to install and get a credit, not that the credit has to be consumed in 10 years. 

Personally, I like to reference IRS and other federal gov't websites as the truth;  I can not find support on the IRS website, the 5695 instructions or the 5695 form that supports a number of ascertions at this link and would not consider this  reference as credible.

https://www.saveonenergy.com/solar-energy/solar-tax-credit/

sorry if I am being overly direct.....