3 common questions about tax quotes

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  • October 13, 2015

Today we are talking solar tax credits with Andrew Mullen, Sales Director for Solaroo Energy, a local solar installation company. Here are three common questions Andrew routinely answers about solar tax credits.

1. Can I use the tax credits multiple times?

There are two main tax credits for us in Utah: A state of Utah credit of 25 percent up to $2,000, and a federal tax credit of 30 percent.

The state of Utah’s guidelines for the renewable energy credit is a maximum payout of 25 percent of the cost of your system up to $2,000. So you can actually use in more than once in the scenario that you install a solar pool heating system this year for a cost of $6,000, which would give you a state tax credit of $1,500 (25 percent).

This option would leave an additional $500 to be used in the future on another qualifying solar purchase. But for the state of Utah tax credit, once the $2,000 is used, no more can be claimed.

The federal tax credit, however, does not have a ceiling.

“You can do a 20 solar panel project on your house this year,” Mullen said. “And add another 20 panels next year. Both purchases on your primary or secondary home would qualify for the 30 percent tax credit.”

Photo credit: MountainStar Health Care

2. Can I use the federal tax credit if I normally get a refund each April?

You can’t tell how much of a solar tax credit you can take by whether you pay or get a refund come tax time. Withholdings are taken from your check each pay period, and are used to pay your taxes all throughout the year, instead of one big check in April. So if you pay too much, you get some back. If you don’t pay enough, you pay the difference in April.

The federal solar tax credit is a credit, not a deduction, off your total tax paid. Line 63 on your 2014 1040 federal tax return is labeled “total tax”. This is the number you want to look at. This is the amount you paid in taxes.

You will not get back more than this amount from your federal solar tax credit in the current tax year.

“If you normally get a $1,500 refund because your withholdings were too much,” Mullen explained. “Then you would get back that $1,500 plus your solar tax credit, as long as the solar tax credit was not more than your total tax.”

3. When is the tax credit going away?

The federal tax credit is set to step down to 10 percent from 30 percent at the end of 2016. Because of the way the tax credit is written, you have to have your system installation complete by the end of each tax year — and at the very latest by the end of 2016 — to take advantage of the credit. Because of this, most solar companies are planning on a big surge for 2016.

“Usually we see a surge in the fall, just so people can finish installation by the end of the year and use the tax credit for the current tax year,” Mullen said. “But next year is going to be crazy. There will be many who wait until the summer or fall of 2016 who won’t be able to get on the install schedule in time for the tax credit, and will miss out. The ones who don’t wait and do it sooner will be fine.”

Whatever your question is on solar tax credits, or installing solar on your roof, be sure to have a knowledgeable solar consultant who can answer your questions. Click here for more info.