Solar panel tax credit

[BrailMethod]

We installed solar panels on our primary family home this year. How do I claim the tax credit? If the rebate/credit is greater than my liability, do I get a refund check, or does it carry over to the following year? If it Carrie’s over, is there a time limit when it must be used by?

[DanielleCPA · Accepted solution]

Hi @BrailMethod!

To claim the solar credit, please follow these steps:

• In TurboTax, open your tax return
• Click on Federal in the left-hand column, then on Deductions & Credits on top of the screen
• Scroll down to All Tax breaks, locate the section Your Home and click on Show more
• Click Start next to Home Energy Credits (see screenshot)
• Follow the interview to enter your information.

The credit is nonrefundable, meaning it cannot create a refund for you.  

• If in 2022 you end up with a bigger credit than you have income tax due — a $3,000 credit on a $2,500 tax bill, for instance—you can't use the credit to get money back from the IRS. Instead, you can carry the credit over to the following tax year.
  • Note - this does not mean that you will not get a refund; it just means that the credit cannot create the refund.  If you have other withholdings or refundable credits, you may still get a refund.  But the solar energy credit cannot reduce your tax liability below 0.
• The credit continues to carry forward until it is fully used up (no time limit)

[Paul_W1]

Hi BrailMethod,

Congrats on the solar panel install.  The residential energy credit has been extended to 2034.  You can get a tax credit 30% of the purchase cost.  This will help lower tax liability or possibly to increase tax refund.  The form 5695 will be generated.  Using Turbo Tax online or desktop will produce it once you complete the interview.  Any unused credit will carry forward until it is used up. If you are due a refund, you can get it process via bank refund direct deposit.  So if you have tax liability of $1,000,  and you have a credit of $2,000 then the the excess will just carry forward until used/exhausted in the following year(s).  Hopefully this helps.  Happy holidays.

[TJ96]

Why does TurboTax 2022 only give 26% tax credit for solar panels when the law is 30%?

[DoninGA]

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@TJ96 wrote:

Why does TurboTax 2022 only give 26% tax credit for solar panels when the law is 30%?

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The IRS has not finalized the Form 5695, Residential Energy Credits, for tax year 2022.  The TurboTax software and form 5695 will be updated after the IRS releases the 2022 form.

TurboTax website for IRS forms availability - https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_online_individual.html

Form 5695, Residential Energy Credits for tax year 2022 is estimated to be available for filing on 02/09/2023

[Cindy1323]

So I just want to clarify, since I am self employed and my tax liability varies each year... does any unused tax credit for the solar panels carry over for just 1 year, 5 years, 10 years, until it is used up?

I keep getting conflicting information from several sources. 

[DoninGA]

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@Cindy1323 wrote:

So I just want to clarify, since I am self employed and my tax liability varies each year... does any unused tax credit for the solar panels carry over for just 1 year, 5 years, 10 years, until it is used up?

I keep getting conflicting information from several sources. 

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The unused credit carries over to the following tax years until it is used up.

[KMYBERRY8292]

My solar tax credit should be 18,900 

Based on 30% of $63,000. I am not seeing proper rebate. 

[PatriciaV]

Please clarify what amount of rebate is appearing on your return and where you see this number.
@KMYBERRY8292

[christysnook]

Hi and thank you for talking with me directly today!

I want to know if (part) of my tax credit for solar panels is being carried over to next year. 'Just looking for verification on that because I can't find it on the website.

Sincerely,

Christy

[Critter-3]

The unused credit carries over to the following tax years until it is used up. Review the form 5695.

[NCperson]

yes, any part of the solar credit that is unused will carry forward.  You can see that on Form 5695..look at line 16.  This is the 2022 form and indicates a carryover to 2023.  If you are asking about 2023, when form 5695 is updated, line 16 will indicate a carryover to 2024. 

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

[Kipmc7]

I think there may be confusion here regarding Tax Liability VS a Refund when dealing with the Solar Credit

I am NOT a tax professional and I'm not sure if this is correct, so please respond.

Based on what I read above:  The Solar tax credit can result in a refund if, when you are all done, your tax Liability, is less that what you have already paid. Your tax liability is also called "Total Tax" and is shown on line 24 of the 2022 1040 form.

The solar tax credit will not result in a refund by reducing your tax liability to less than zero.  For example, if your income is low enough or your deductions are high enough that you tax liability (Total Tax) is zero.  Tax liability is not the amount owed on April 15th. The number I am talking about is Total Tax, line 24 of form 104o. The amount owed is a different number: 

Amount owed = tax liability - amount already paid.

In this case, the credit can only reduce your tax liability to zero for that year. Any unused amount can still be used in future years.

Here are 2 scenarios:

#1 Say after all my income, and deductions I have a tax liability of $5,000. And I have paid $6,000 in payroll deductions. I would have gotten a refund of $1000. I also installed a solar system costing $10,000. That results in a credit of $3000 (30%).

Would my refund increase to $4000? I think it would. Another way to consider this is that I had a liability (Total Tax Line shown on line 24) of $5000. The Solar credit reduces my liability by $3000 down to $2000. Since I have paid in $6000 I get a refund of $4000.

Correct??

Scenario 2 After my income and deductions my tax liability is $2000 and I have paid in $1000 in payroll deductions. I would have owed $1000. I have the same $3000 credit as before.

I can use the $2000 of the $3000 credit to reduce my liability to zero. I can’t use the credit to reduce my liability to less than zero. I would still have another $1000 credit to use next year. This year, since my liability is zero and I have paid in $1000 I get a refund of $1000.

Correct? Please respond. Thank you

[Kipmc7]

Many of these responses are poorly written. Saying the the solar credit can not create a refund is WRONG.!!   I solar credit CAN create a refund, it just can't create a refund of MORE than you have paid in (payroll deductions and estimated payments) Another way to say this is that the solar credit can not reduce your tax liability ( line 24 of form 1040) to less than zero.  

[VolvoGirl]

Yes your 2 scenarios are correct.  It is called a non-refundable credit.  A refundable credit you can get even if you have no tax liability on line 22 (not line 24).