Do I qualify for the Federal Tax Credit?

[SunEagle]

I agree, it's funny how excited people get about getting a big refund when doing their taxes. All it means is you paid too much throughout the year, basically giving the government your money to use interest free.

Some people can't save on their own so use the Feds as a piggy bank to do the saving for them. Sad but it is sometimes easier for people to work that way.

[HX_Guy]

A bit of a rant are all those tax adds about how much money the US owes you when you do your taxes. The objective is to owe them money not get a check back.

I agree, it's funny how excited people get about getting a big refund when doing their taxes. All it means is you paid too much throughout the year, basically giving the government your money to use interest free.

[peakbagger]

The optimistic method is if you absolutely know you are getting a solar tax credit at the end of the year, revise your W-2s to claim more exemptions so they take less out of your paycheck. Then when you are filing taxes you would normally owe extra because you under withheld. If you figured it out right, the tax credit will offset what you owe. Sure you don't get a big check from Uncle Sam but you had more money to spend all year.

A bit of a rant are all those tax ads about how much money the US owes you when you do your taxes. The objective is to owe them money not get a check back.

[HX_Guy]

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.

The fact that you paid throughout the year doesn't change how much you owed in taxes. It's not how much do you owe at the end of the year, it's how much did you owe throughout the year.

As you said, it's not a refund, but a refund would mean that even if you owed $0 all year (say you had no income at all), then you would get money back. That's not what the solar credit is.

But if you did have income, and you owed $5,000 in taxes on that income, then you would get that $5,000 back if you paid into your taxes. If you paid nothing toward your taxes, and you would owe X - the tax credit. If you paid $5,000 toward your taxes owed, then you'd get the $5,000 back. If you over paid your taxes, say you paid $7,000 but only owed $5,000, then you'd get $7,000 back.

[gregvet]

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.

Lets take this one step further:
In example 1: You had $5800 solar credit, you would get back 2K($10000-$8000) plus $5800 = $7800.
In example 2: You owed an additional 2K and had a $5800 Solar credit. You would get back $10000-$12000+5800 = 3800.
In example 3: You had $5800 Solar credit You would get back 5K for liability overpayment and also get back Liability less Solar credit to the extent of your liability ($10000-$5000+($5000+($5000-$5800))) = $10000 with $800 carried forward to the following year. That was the way I calculated my taxes and I did get a full refund on my liability.

[ButchDeal]

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.

It is a credit on your taxes, so you would get a refund.

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.

You did your taxes incorrectly. You could still go back and refile your 2013 with an amendment.

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.

You are incorrect in this. You can get back in the year up to what you paid in taxes (through withholdings or quarterly payments), the rest carries forward.

[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.

[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.

[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!

[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]

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.

[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

[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.

[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]

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