Solar Tax Credit for W2 vs 1099 filers explained. "Do I get the tax credit if I receive a refund?" 

Of course. Reach out for a consultation if you’re in the market for a system. 760-473-5878

Thank you. Glad it was helpful

Where are you located? I work with multiple lenders that cover everywhere in the US

If only this applied to PA state taxes as well as Federal. 😁

yeah... PA has other invectives though! have you seen my NE state video?

@@Superiorsolarconsulting Must be not as I don’t recall any meaningful PA incentives for residential installations. I will go back and look for it.

@@Superiorsolarconsulting Do you mean this one? ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-pZEnPFWO1JI.htmlsi=eAdHXgyCMF23byp5

Any electrical work that’s required for the solar and combined in the contract is included in the tax credit. Sub panels do qualify. Batteries qualify. Balance of system qualifies. To be honest with you I don’t sell portable panels. I consult for solar construction projects and so it’s not really my area of expertise. I’ve never been in that business. But, considering the tax credit is tied to the completion of construction of a system so it can service a given property makes me think you’re stretching with a portable system if it can easily be picked up and taken to another property. You can definitely still take the tax credit on a homeowner builder deal. Everything still needs to be permitted although I will say that about 90% of people that set out to start on a DIY system end up needing a contractor to step in and essentially save the day after they realized it was far more complex than they thought initially.

To see what qualifies, read the law 26 USC Section 25D. You should also read IRS Notice 2013-70, IRS FS-2022-40, and IRS Private Letter Rulings 201809003, 201536017, 201130003, and 201035003. You should be able to find all of those documents with a simple Google search. If you can't, let me know. Specifically, there is no minimum system size because the tax credit applies to qualified expenditures and there is no minimum specified in the law. Portable panels do not qualify because 26 USC Section 25D(e)(8)(A) requires "installation." I guess if you install the portable panels, then they could qualify. A subpanel can qualify. In IRS Private Letter Ruling 201130003, the IRS sort of said that a solar sub panel qualifies. Note that the subpanel was 100% dedicated to the solar and wasn't used for something else, which was probably a deciding factor. See IRS Private Letter Ruling 201809003 for an analysis. As for a DIY system, that also qualifies and you'd claim the tax credit for the taxable year when the original installation is completed (assuming you're living there at the time) not when you start the installation or pay for the components. 26 USC Section 25D(e)(8)(A). I note that @Superiorsolarconsulting has shared some slightly misleading information. Electrical work required for the solar may or may not qualify. In IRS FS-2022-40, page 3, the IRS noted that a new roof necessary for the solar does not qualify for the tax credit. According, the "needed" test does not exist. Rather a better test is costs that are 100% dedicated to the solar (IRS Private Letter Ruling 201809003) will probably qualify, but say if you benefit from those costs in another way, like having a new roof, that does not qualify because those costs are not 100% dedicated to the solar. Lastly, unpermitted DIY does qualify for the tax credit because there is no tax credit law requirement that the work be permitted or the work be done by a licensed person. Basically, the IRS doesn't care if you get permits or not nor does the IRS care whether you even install the solar safely, but you should still get permits and the work be licensed because other government entities do care if you have permits and licensed work . . . and because you don't want to burn your house down.

I am not of the understanding you can take the tax credit over multiple years past the 2034 sunset but I could be wrong. The point of this video was to explain a w2 employee with a refund still qualifies and that it’s available for at least 10 more years and you can take it over multiple years.

@@Superiorsolarconsulting I’m not saying someone can take the tax credit after 2035, I’m saying that someone can take the unused carryforward amount after 2035. You seem to be conflating "taking the tax credit" and "taking the carryforward amount." Assuming a taxpayer installs solar once, the taxpayer takes the tax credit once (the taxable year of when the installation is completed). The taxpayer can then carryforward (or "carry") that amount for as long as necessary (so long as a new form 5695 is filed each year). The form 5695 instructions have two relevant portions here regarding the words "take" and "use": “Use Form 5695 to figure and TAKE your residential energy credits. The residential energy credits are: • The residential clean energy credit, and • The energy efficient home improvement credit. Also use Form 5695 to TAKE any residential energy efficient property credit carryforward from 2021 or to carry the UNUSED portion of the residential clean energy credit to 2023.” and the second is: “If you can't USE all of the credit because of the tax liability limit (that is, line 14 is less than line 13), you can carry the UNUSED portion of the credit to 2023.” Next, I'll explain why the unused carryforward can go past 2035. 26 USC Section 25D(c) has the carryforward provision of the law. It says: "If the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year." Notice that the language does not have a limit on the carryforward. I understand that the language sounds like the carryforward is limited to one year because the sentence ends with "for such succeeding taxable YEAR", but the IRS has written in IRS FS-2022-40, page 6: "Under the Residential Clean Energy Property Credit: a taxpayer may carry forward the unused amount of the credit to reduce tax liability in future tax YEARS." Also, form 5695 is structured to allow unlimited carryforwards (lines 12 and 16). So basically, there is no limit as to how many years the unused credit can be carried forward. The carryforward can be done past 2035 because there's nothing in the law preventing that. The only language in the law regarding any termination or cutoff is in 26 USC Section 25D(h) which says: "The credit allowed under this section shall not apply to property placed in service after December 31, 2034." Notice that the December 31, 2034 date applies based on when the property is placed in service and is not a cutoff for using a carryforward amount. So if someone completes installation and places in service solar on December 31, 2034, the language of the law still applies to that person's installed property on January 1, 2035, including the language of the carryforward in 26 USC Section 25D(c).

@@sirmontego2I’m with you and understand. The main point of this video was to explain the common misunderstanding with w2 filers usually getting a refund and not thinking they qualify. We are 10 years away from the sunset anyways but I’m glad you’re saying the credit sit in your account indefinitely. Most can take the full tax credit over a couple years if they can’t get it all year 1

Whatever your federal income tax is at the end of the year, that’s how much you can get back. The rest will roll over

Nonrefundable doesn’t mean you can’t get a check. The definitions are confusing. I’ve spoken to my cpa at length about this. They’ll give you a check for up to the amount you already paid in throughout the year. You can’t surpass your liability amount.

That’s a really good question. To be honest I’m not 100% sure. I would assume the IRS needs to be notified to include it. I will ask my CPA for you. Please send me a quick email so I know to respond to your question. Juliansolarguide@gmail.com

You'll need to file a new form 5695. Let's say you have solar installed during 2023. Let's say paid $30,000, which allows you to claim a tax credit of $9,000, calculated as 30% x $30,000. Let's also say that your 2023 tax liability is $6,000. When you file your 2023 taxes in April 2024, include a Form 5695 with those taxes. Assuming the line numbers don't change from the 2022 version of Form 5695 and you don't have any other things to claim a tax credit on, you'd write $30,000 on lines 1 and 6a, $9,000 on lines 6b and 13, $6,000 (your tax liability) on line 14 and 15, and $3,000 (your carryforward) on line 16. Make sure to apply the line 15 number to the other tax forms. When you file your 2024 taxes, include another Form 5695 and on line 12 (the carryforward from 2023), write $3,000 (the same number from the previous year's form 5695, line 16). Use as much of that money as you can and if there is any left, write that amount on line 16 to carryforward that amount to 2025. In 2025, file another form 5695 and on line 12 write the previous year's form 5695, line 16. Keep repeating until you use up all the tax credit.

Great info! Thanks!

You are correct with your math. Always consult a tax pro to be sure

@@Superiorsolarconsulting Thank you for the confirmation! I was supposed to get the panels installed before the end of the year but I'm not too sure that's going to happen. A part of me wants to walk away from getting the panels. The Sales rep and his team presented the credit as a "refund" you get up front come tax season. That's the main reason I agreed to get the panels around this time. I figured I could use that "refund" to pay off some misc credit card charges and focus only on the solar panel payments. Another part of me is trying to justify the solar panels will be "worth it" in the long run.

@@somehopeforhumanityfeel free to email or text me and we can go through your project together if you’d like. 760-473-5878