Carry Forward of Federal Tax Credit?

[vnatale]

Seeking clarification regarding carrying forward on one's tax return any unused Solar Federal Tax Credits.

I've received three quotes from the leading three solar installers in my area. Two of them have stated that they will not be able to complete their installations until 2023. The other said it could happen in 2022.

Until Congress changes current tax law .... A 2022 installation generates a 26% tax credit while a 2023 installation generates a 22% tax credit. Any installations after 2023 (e.g., 2024) generate no tax credit.

If I don't get an installation until 2023 then that will be the year I earn the credit. However, I would not have enough taxes in 2023 to fully absorb that credit. I could do an IRA Roth conversion to generate additional taxes to absorb the full credit but that would end up having my Social Security being taxed at a higher rate, which would then reduce the value of that credit.

It would be ideal if that tax credit could be carried forward to several years beyond 2023.

Whenever I do my tax returns I always find sufficient authority for anything I do on that tax return. Usually something I find either at the IRS website or one of its publications.

Yesterday I spent many, many, many hours without success trying to find any authority on what happens to a Solar Tax Credit generated in 2023 but not able to be fully used in 2023.

I found varying opinions. A few times I found that it could be carried forward for five years. But, again, nothing authoritative to back that up. On the opposite end, I read that if the tax credit no longer existed, e.g., 2024, then there could be no carry forwards to that year.

I know a could contact a practicing CPA but it seems a high probability the CPA would not have the answer in his / her head, would have to research it, and then come to the same conclusion that I have -- that it is NOT definitive and is ambiguous.

Today I received a reply to the same question I'd posed in the Enphase Forum which describes what I believe to be the current status of the carry forward:

"The real issue is whether you can take the credit or roll it over for future years after the ITC has expired. Good question, but I'd bet the IRS doesn't even know."

Anyone here have any better insight into this?

This is one of two major issues that is holding me up from deciding to do a solar installation.

Thanks!

[Mike 134]

I'd suggest getting advice from a tax expert. Forum tax advice is on par with what your bartender and his/her patrons can offer.

[chrisski]

I second the tax advisor. Rumor has it the inflation reduction act put in a solar credit until 2033, then it will reduce. That was passed over the weekend and don't know if it has been signed, but sure it will.

[bcroe]

In 2013 I received a tax credit on an 18KW installation, and found it
could be taken over taxes for several years. I am sure you will find that
is still the case, though I did not choose to spread out mine. Bruce Roe

[chrisski]

This inflation reduction act will change the rules as they are today. We really need to wait until the IRS publishes their rules on this new law. We don't know what is in it. I would hope a tax advisor would say that if you talked to him today "Wait a couple of weeks.."

I expect it to go back to what it was a couple years ago and be able to spread the refund out. So, I expect just reverting back to the slightly better rates.

[jplee3]

This inflation reduction act will change the rules as they are today. We really need to wait until the IRS publishes their rules on this new law. We don't know what is in it. I would hope a tax advisor would say that if you talked to him today "Wait a couple of weeks.."

I expect it to go back to what it was a couple years ago and be able to spread the refund out. So, I expect just reverting back to the slightly better rates.

Looks like the bill was signed into law. It *sounds* like there is now a 30% tax credit available on solar installs? And effective immediately?

"The second credit homeowners are eying is the current Residential Energy Efficient Property Credit, which also gets a new name under the Inflation Reduction Act. It's now called the Residential Clean Energy Credit. The credit, which was previously scheduled to expire in 2024, is extended through 2034 as well.

In addition to a name change and extension, the Inflation Reduction Act also boosts the credit amount. Previously, the credit was worth 26% of the cost to install qualifying systems that use solar, wind, geothermal, biomass or fuel cell power to produce electricity, heat water or regulate the temperature in your home. (The credit for fuel cell equipment was limited to $500 for each one-half kilowatt of capacity.) The credit amount was also scheduled to drop to 23% in 2023 and then expire in 2024. Under the Inflation Reduction Act, the credit amount jumps to 30% from 2022 to 2032. It then falls to 26% for 2033 and 22% for 2034. The credit will then expire after 2034."

https://www.kiplinger.com/taxes/605069/inflation-reduction-act-tax-credits-energy-efficient-home-improvements