I have always itemized tax deductions because my charitable contributions were larger than the standard deduction. I have received federal tax refunds after filing. Should I alter my charitable contributions in 2022 to accommodate the 26% federal tax credit for the $16,000 solar panel system I am installing in 2022? That is, should I lessen my other itemized tax deductions in 2022 compared with the past?
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Hello @haujod !
Great question. Love to see people planning ahead on their taxes!
Basically, deductions and credits are handled completely differently. You don't need to worry about losing out on any of your credit, because any portion of it that cannot be used (i.e. that exceeds your tax liability for the year) will be carried forward to be used against next year's tax liability. If your tax liability is usually very low or 0 (you can find it on line 24 of your Form 1040), then from a tax perspective it MAY make sense to ease up on the charitable donations, since you have this significant credit available to offset any tax liability.
I hope this answer helps you! Please respond here if you have further questions.
Best,
Adam, EA
TurboTax Live Expert
Hello @haujod !
Great question. Love to see people planning ahead on their taxes!
Basically, deductions and credits are handled completely differently. You don't need to worry about losing out on any of your credit, because any portion of it that cannot be used (i.e. that exceeds your tax liability for the year) will be carried forward to be used against next year's tax liability. If your tax liability is usually very low or 0 (you can find it on line 24 of your Form 1040), then from a tax perspective it MAY make sense to ease up on the charitable donations, since you have this significant credit available to offset any tax liability.
I hope this answer helps you! Please respond here if you have further questions.
Best,
Adam, EA
TurboTax Live Expert
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