Do I qualify for the Federal Tax Credit?

[steeve725]

Hi, Everyone

Before I decide on Solar or not, I need to know peoples input on the Federal Tax Credit of 30% for going solar.

According to what I have read on the internet and me being NO tax consultant or CPA the credit only applies to people that OWE taxes.

I have never owed and always get a refund.

Has anyone been in my position were they get a refund and went solar?

How did the 30% federal tax credit work for you?

The way these Solar sales people write it up, they put your total amount for the system, then deduct the 30% federal tax credit, then local utility rebates, then they tell you your put of pocket price you will pay for the system.

Its (30% fed tax credit) confusing to me, because if I don't get it then my out of pocket will be much higher.

Thank You for any input

Steve

[HX_Guy]

Do you have a regular job where you get a W2 or are you self employed?

One thing you have to realize about getting a refund is that means you paid too much in taxes throughout the year, and you're just getting that difference back.

The way it works with the 30% tax credit is that you would adjust your withholding on your paychecks so that you don't pay any taxes, or very little, throughout the year and then when it's time to do your taxes...it'll show you owe X amount but that will then be zero'd out or offset by the 30% tax credit.
At least that's how I understand it to work for W2 employees.

I'm self-employed/business owner so I normally have to send in quarterly tax payments but with the solar, I can just not send those in and then when I do the taxes, same scenario as above, the amount due is offset by the solar tax credit.

[gregvet]

Whether you owe or do not owe taxes, if you have had withholding tax taken from your pay, then you will get a refund/credit against that tax that was withheld to the extent that you satisfy the qualifications for getting the 30% tax credit. On my first year after PV installation, I had enough withholding tax from my pay that I received all of it back. Excess credits can be taken in the following year(s). I am not a tax accountant but I stayed in a Holiday Inn.....Check with your tax adviser oops.. looks like Hx Guy beat me to the reply.

[HX_Guy]

Whether you owe or do not owe taxes, if you have had withholding tax taken from your pay, then you will get a refund/credit against that tax that was withheld to the extent that you satisfy the qualifications for getting the 30% tax credit. On my first year after PV installation, I had enough withholding tax from my pay that I received all of it back. Excess credits can be taken in the following year(s). I am not a tax accountant but I stayed in a Holiday Inn.....Check with your tax adviser oops.. looks like Hx Guy beat me to the reply.

Hmm actually your answer is better because I didn't realize you can leave your withholding alone and get a refund. I thought you only got the tax credit if you owed taxes at the end of the year...I figured if you owed $0 or were getting a refund, then you would lose out on the 30% solar credit but you're saying you actually get it back? That makes it a lot simpler for people vs having your withholding adjusted and messing with all that.

[gregvet]

but you're saying you actually get it back? That makes it a lot simpler for people vs having your withholding adjusted and messing with all that.

Yes, if you had withholding tax taken from your pay, you will get a refund up to the 30% calculated PV cost credit. Depending on what your calculated withholding tax was you will get /none/some/all of it back. If you had no calculated withholding tax at the end of the tax year(very unlikely), you cannot get a refund but you can carry the credit forward and hopefully you will get it back before the carry-forward tax credit expires.

[bcroe]

I believe the important thing is, the total amount of tax that must be paid that year
can be reduced by the amount of 30% of the solar investment that year. But the
reduction cannot exceed the amount of tax that year. If there is excess it can be
carried over against a later year's taxes, provided the credit is still allowed that year.
The issue of paying or refund works the same. Bruce Roe

[myfriendSUN]

the credit only applies to people that OWE taxes.
It should say the credit only applies to people that have to pay income tax.

I have never owed and always get a refund.
So you pay income tax and you pay more than what you are supposed to pay in advance and hence get a refund.
You are good to go.
It depends on how much tax you have to pay when you file your tax retrun. The most money you can get back from one year would be the 30% credit or the amount of tax you have to pay for that year.
If your 30% credit is greater than the tax you have to pay then you can claim the rest of it in the following year.

Has anyone been in my position were they get a refund and went solar?
I believe everyone is in your position.

How did the 30% federal tax credit work for you?
Good. I am going to get the whole 30% credit back in one shot next month.
So I paid very little income tax for 2014.

they put your total amount for the system, then deduct the 30% federal tax credit, then local utility rebates, then they tell you your put of pocket price you will pay for the system.
Net cost = Total cost - local utility rebates
Fed tax credit = 30% of the Net cost
State tax credit = x % of the Net cost if your state has it
Property tax abatement = y % of the Net cost if your state has it

[HX_Guy]

My summary myfriendSUN!

To the OP...take a look at your 2013 taxes, on your 1040 line 61 it should say "Add lines 55 through 60. The is your total tax.[/b] That should give you a good idea of how much you would get back in addition to whatever you normally get back (unless you had a change in jobs between 2013 and 2014). If that number on line 61 is bigger than the 30% solar credit, then you would get the 30% solar credit amount + whatever you normally get back.

[myfriendSUN]

Fed would not take their money and give it to you.
They just take your tax money first and then give back the 30% credit to you.

[bcroe]

The conditions of the state credit will vary. Because of the number of applications, Illinois
has a lottery to determine who gets paid. Lose, you can apply again the next year. There
is a cap of $10,000 no matter how big your array is. Months later the money comes as a
straight check independent of your taxes, possibly in a different tax year. The following
year they will come back and tax it. Bruce Roe

[lclevel1]

Being eligible to receive the Federal Solar Tax Credit has nothing to do with whether or not you will be getting a refund, or having to pay. It’s based on your TAX LIABILITY for that TAX YEAR.

The example below is based on a $25,000 Solar System (30% = $7,500 Credit)

Example #1: Let’s say during the year you had paycheck Federal tax withholdings of $10,000. After completing your tax return you discovered that you have a tax liability of only $8,000, so you will be getting a refund of $2,000. In addition you would also be getting a 30% credit (up to $8,000, your yearly tax liability).
You would get $7,500(Solar Credit) + $2,000 (Refund) = Total $9,500 Refund.

Example# 2: Let’s say during the year you had paycheck Federal tax withholdings of $10,000. After completing your tax return you discovered that you have a tax liability of $12,000, so you now OWE the IRS $2,000. In addition you would also be getting a 30% solar tax credit (up to $12,000 your yearly tax liability).
You would get $7,500 (Solar Credit) + you owe the IRS $2,000 = $5,500 Refund.


If your Solar Credit is more than your tax liability for the year, the remaining balance would be carried over to the following year.

Example #3: Let’s say during the year you had paycheck Federal tax withholdings of $10,000. After completing your tax return you discovered that you have a tax liability of only $5,000, so you now will be getting a refund of $5,000. In addition you would also be getting a 30% solar tax credit (up to $5,000 your yearly tax liability).
You would get $5,000 (Solar Credit) + $5,000(Refund) = Total $10,000 Refund.
$2,500 would be carried over to the next year.

[gregvet]

Being eligible to receive the Federal Solar Tax Credit has nothing to do with whether or not you will be getting a refund, or having to pay. It’s based on your TAX LIABILITY for that TAX YEAR.

The example below is based on a $25,000 Solar System (30% = $7,500 Credit)

If your Solar Credit is more than your tax liability for the year, the remaining balance would be carried over to the following year.

Example #3: Let’s say during the year you had paycheck Federal tax withholdings of $10,000. After completing your tax return you discovered that you have a tax liability of only $5,000, so you now will be getting a refund of $5,000. In addition you would also be getting a 30% solar tax credit (up to $5,000 your yearly tax liability).
You would get $5,000 (Solar Credit) + $5,000(Refund) = Total $10,000 Refund.

Plus you will have a $2500 ($7,500 PV credit-$5,000 credited that tax year) credit carried forward to the next tax year.

[lclevel1]

Plus you will have a $2500 ($7,500 PV credit-$5,000 credited that tax year) credit carried forward to the next tax year.

Correct. I hit the submit button to soon. LOL!

[SoCalsolar]

Only thing I would add is

Being eligible to receive the Federal Solar Tax Credit has nothing to do with whether or not you will be getting a refund, or having to pay. It’s based on your annual TAX LIABILITY until you have received the full amount of the tax credit or 2016 tax year whichever comes first. IRS form 5695. The 2016 deadline may or may not be extended.

[MGE]

I must be missing something. Here in Cal. is how I interpret the FED tax credit. As per lclevel1's

Example #1 if you pay out 10k in fed taxes and your tax liability is only 8k you would get 2k back from the difference which is logical. But you get ZERO back that year for the solar credit, it's a credit not an actual refund. It can be used to offset what you OWE.

Example #2 pay 10k in fed taxes and your tax liability is 12k you would owe 2k to the feds. You CAN use a portion of the tax CREDIT towards that amount for the 2k which you would not owe. Leaving a remaining balance of (solar) fed credit of 5.5k to be used in the following year or years until 2016 I believe.

Example #3 pay 10k in fed taxes and your liability is only 5k you get back 5k on your return. You would receive ZERO back from the solar credit.

My wife and I being recently retired our annual income is significantly lower than what it used to be when I had my business so when I installed my system back in April of 2013 I ended up with a credit of approx $5,800. When my taxes were done for that year we owed about $300 to the fed which we offset with the $300 worth of solar credit to zero it out the balance owed leaving us a carryover CREDIT of about $5,500 for the next tax year.

We adjusted our tax deductions on our pension amounts to receive more money per month in our pocket and will likely owe more fed tax this next year which we will again offset with the credit and whatever is leftover (if we don't use it all) will carryover to the next tax year when we will have to finally use it up either in pension tax adjustments or a 401k withdrawal to use up the remaining credit balance.

But the "Federal Solar credit" money can only be used to offset money you owe not being able to be refunded like an overpayment.

If I'm wrong in what I understand to be correct please let me know.