Salesperson: Congratulations on your Solar Installation. You will be receiving a $12000 federal tax refund!
Taxpayers often hear this from many salespersons. Unfortunately, this information is incorrect.
What this taxpayer would actually receive is a $12000 federal energy tax credit. Credits reduce your taxes.
If your taxable income is zero, then you will not get any of the credit that year. You don’t lose it. It carries over to the next tax year and so on until the credit is used up.
However, the finance companies that these solar installers use are expecting that $12000 payment when you file your taxes. If you fail to make the payment, they will re-amortize your loan often resulting in a much higher monthly payment and a higher APR.
Residential Energy Tax Credits are Non-refundable meaning that they can only reduce your tax to zero whereas a refundable tax credit results in a tax refund even if the amount owed is below zero. An example of this is the additional child tax credit or the earned income tax credit. Below is a link for all the new updated tax credits for tax year 2023.
https://www.energystar.gov/about/federal_tax_credits/non_business_energy_property_tax_credits
Adams Enterprises will answer any questions you may have concerning tax credits. Give us a call and let us help you!
