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Tax credit for solar installation?

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  • Tax credit for solar installation?

    I have a quick-ish question about the available federal tax credit for solar installation.

    For instance, ever year, my wife and I pay in enough on our federal taxes to get a refund as we don't claim any exemptions and such through our employers.

    Because we get refunds and don't owe extra at the end of the year, does that mean we can't claim the 30% credit?

    Or... does that 30% credit come off the top of what is owed... and we will just get back more of what we paid in?

    For instance... say our total tax liability is 3k for a year. We pay out of 4500 and get a refund of 1500 at the end of the year. Would the 30% apply to the 3k we owe in total for the year or would it only apply if we owed extra at the end of the year?

    Thanks
    -Chris

  • #2
    Originally posted by Mr4btTahoe View Post
    I have a quick-ish question about the available federal tax credit for solar installation.

    For instance, ever year, my wife and I pay in enough on our federal taxes to get a refund as we don't claim any exemptions and such through our employers.

    Because we get refunds and don't owe extra at the end of the year, does that mean we can't claim the 30% credit?
    -Chris
    You still get the credit.

    If you are like most people, your total tax liability represents a percentage of your income, and this percentage (estimated) is deducted from your paycheck every month and sent to the government. At the end of the year you don't pay all the taxes, you just "true-up." If your deduction was spot-on you pay zero. If it wasn't, you pay more or get a refund.

    Thus you can either take the refund or reduce your withholding for that year. Usually just easier to take the refund.

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    • #3
      Aside from the wisdom of giving the government a tax free loan (and NOMB) by overwithholding, the solar tax credit will reduce your tax burden $ for $. Just like any other unused tax credit or overpayment in any tax year, that tax credit can be carried forward to offset taxes due in future years.

      More NOMB, and not a knock, but it sounds like you might benefit from the services of a CPA or some self help by getting informed about taxes.

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      • #4
        ^ I'm sure just about everyone could benefit from that. Lol. I basically just don't want to owe taxes at the end of the year hence why I don't claim any deductions. The refund is nice because I'm by no means, a saver... so it works out as a no-interest savings account that I can't touch. Come tax time, we have enough "saved" to do something fun or take care of a bigger project.

        Thanks for the info guys.
        Last edited by Mr4btTahoe; 05-11-2018, 10:18 AM.

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        • #5
          Originally posted by Mr4btTahoe View Post
          ^ I'm sure just about everyone could benefit from that. Lol. I basically just don't want to owe taxes at the end of the year hence why I don't claim any deductions. The refund is nice because I'm by no means, a saver... so it works out as a no-interest savings account that I can't touch. Come tax time, we have enough "saved" to do something fun or take care of a bigger project.

          Thanks for the info guys.
          My first wife was a CPA. At that time our taxes were not so complicated as mine are now, and income was a bit more predictable. She'd estimate/adjust our withholding/est. taxes 1X/yr. on/around 04/15 via a W-4 with maybe another adjustment later in the year so that we always owed taxes on 04/15 of the following year, but only just shy of inducing a tax penalty for underpayment of taxes.

          Big or any refunds are, in the opinion of many, a poor use of economic resources. NOMB. Just sayin'.

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          • #6
            Originally posted by J.P.M. View Post
            Big or any refunds are, in the opinion of many, a poor use of economic resources. NOMB. Just sayin'.
            Agree, but they do not teach such things in school. With my wife being a Doctor owning her own practice paid quarterly, and when I worked for someone had minimum withholding so I always owed at the end of the year. We paid ourselves into an interest bearing account to pay taxes. Like you I will not give goberment a interest free loan, they dang sure will not do that for you. That interest added up to some big bucks, much larger than any refund. I wished schools taught money management like a Roth 401, budgets, and retirement planning. Anyone can retire tax-free at 59-1/2 years old comfortably. Not hard to do, just live below your means and pay yourself.
            MSEE, PE

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            • #7
              Originally posted by Sunking View Post
              Agree, but they do not teach such things in school. With my wife being a Doctor owning her own practice paid quarterly, and when I worked for someone had minimum withholding so I always owed at the end of the year. We paid ourselves into an interest bearing account to pay taxes. Like you I will not give goberment a interest free loan, they dang sure will not do that for you. That interest added up to some big bucks, much larger than any refund. I wished schools taught money management like a Roth 401, budgets, and retirement planning. Anyone can retire tax-free at 59-1/2 years old comfortably. Not hard to do, just live below your means and pay yourself.
              Sometimes I wonder if schools teach much of anything anymore. But looked at another way, the best teacher on earth with the best techniques can't teach much of anything to a cabbage head who was never taught to really think.

              I suspect a lot of what passes for schooling these days is 20 and 30 something teachers who never learned to think critically trying to install factoids but no thinking skills into students who then believe a diploma somehow magically defines them as educated.

              Rant mode off.

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              • #8
                The advice I haven't seen given here, is you have to be itemizing your taxs to take advantage I'm pretty sure. And not knowing exactly how the new tax code will work might be a challenge answering that part as well.

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                • #9
                  Originally posted by Brian53713 View Post
                  The advice I haven't seen given here, is you have to be itemizing your taxs to take advantage I'm pretty sure. And not knowing exactly how the new tax code will work might be a challenge answering that part as well.
                  Not a plug, but turbotax and/or other software can be your, or anyone's, friend.

                  Comment


                  • #10
                    Originally posted by J.P.M. View Post

                    Sometimes I wonder if schools teach much of anything anymore. But looked at another way, the best teacher on earth with the best techniques can't teach much of anything to a cabbage head who was never taught to really think.

                    I suspect a lot of what passes for schooling these days is 20 and 30 something teachers who never learned to think critically trying to install factoids but no thinking skills into students who then believe a diploma somehow magically defines them as educated.

                    Rant mode off.
                    I have a few friends that are teachers. The problem isn't the teachers these days... it's the system. Mandatory "standardized" testing... no discipline. Classroom sizes are huge (30+ to a teacher because they can't find anyone willing to take 30k a year to deal with the nonsense) and any time a child isn't doing their work or is failing, it's the teachers fault as the kids can do no wrong. We are raising up a society of victims. But anyways....

                    Comment


                    • #11
                      Originally posted by Sunking View Post
                      Like you I will not give goberment a interest free loan, they dang sure will not do that for you.
                      The IRS will penalize you (with another tax) if you have too little withholding. But they don't reward you for having too much withholding.
                      https://pvoutput.org/list.jsp?sid=54099

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                      • #12
                        Originally posted by NukeEngineer View Post

                        The IRS will penalize you (with another tax) if you have too little withholding. But they don't reward you for having too much withholding.
                        Yea, as I wrote, you'll get wacked if you underpay throughout the year, either through payroll withholding or estimated tax payments, but last I checked, the underpayment had to be > 20 % of the taxes owed. However, don't quote me on that 20 % number. I'm not a CPA, or any accountant really, and I don't play one on TV. With respect to tax matters, always seek qualified advice from tax professionals.

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                        • #13
                          My withholding never matches all the radical changes happening here, but so far a big est payment
                          near the end of the year seems to satisfy them. Bruce Roe

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                          • #14
                            Originally posted by bcroe View Post
                            My withholding never matches all the radical changes happening here, but so far a big est payment
                            near the end of the year seems to satisfy them. Bruce Roe
                            I'd suggest that chaos you mention is a consequence of social entropy - in this case, politicians screwing with the tax system .

                            Yea, the 4th quarter payment is usually the mop up payment for me as well.

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                            • #15
                              Originally posted by Brian53713 View Post
                              The advice I haven't seen given here, is you have to be itemizing your taxs to take advantage I'm pretty sure
                              It's a good thing you're not seeing that advice because it's WRONG for 2017 taxes.
                              And it'll be wrong for 2018 as well (unless the tax laws change - which is unlikely but not impossible)

                              You don't have to itemize (use schedule A).
                              You do have to fill out form 5695.
                              And the resulting number from that goes as a credit on your 1040 (line 53 in 2017's 1040)

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