Federal Tax Credit and State Sales Tax questions

[EastTexCowboy]

Correct, this is why I only installed one heat pump mini split this year and another will go in next year. I carried over some of the Clean Energy Credit and probably won't need more Energy Efficiency Credit for my tax liability.

Well that sucks. I installed all four Mitsubishi this year and I have a credit carried over from last year on the solar. But I have to say, these new units got us through the crazy Texas heat this summer and kept the house frosty so I'm gonna take the hit and be happy.

On audits in general, I'm not a tax professional but I've been audited twice. They picked through every receipt and record looking for something (I beat them both times) but they had no interest in laying eyes on anything. Some of it will depend on whether you're grid tied due to the records there but even with off grid covering only part of the usage there's going to be a drop in the electric bill. Would they dig that far? I doubt it. The real key to any of this is to not have any red flags that trigger an audit. Because sans an audit it doesn't matter what you say. I'm not saying to lie or defraud by any stretch, but if you claim it one year when it was supposed to be another the worst you're likely looking at if audited would be to pay a penalty and any difference in what the tax savings may have been.

 

[SonicXtasy]

Thanks for all the input guys! My latest electric bill was $609 so this will be happening soon, even if I just temp panels on my flat roof.

 

[OffGridInTheCity]

Well that sucks. I installed all four Mitsubishi this year and I have a credit carried over from last year on the solar. But I have to say, these new units got us through the crazy Texas heat this summer and kept the house frosty so I'm gonna take the hit and be happy.

On audits in general, I'm not a tax professional but I've been audited twice. They picked through every receipt and record looking for something (I beat them both times) but they had no interest in laying eyes on anything. Some of it will depend on whether you're grid tied due to the records there but even with off grid covering only part of the usage there's going to be a drop in the electric bill. Would they dig that far? I doubt it. The real key to any of this is to not have any red flags that trigger an audit. Because sans an audit it doesn't matter what you say. I'm not saying to lie or defraud by any stretch, but if you claim it one year when it was supposed to be another the worst you're likely looking at if audited would be to pay a penalty and any difference in what the tax savings may have been.

Agree with @EastExCowboy

I've never been audited, use TurboTax, I'm off-grid, BUT.... I have every single purchase date/time/amount listed in a (quite large) spreadsheet to back up my tax claims. Nearing 500 rows of purchases since 2017 from which I can locate every receipt. I also have detailed solar power production/consumption records to show the system has been working/active over this whole period.

There can always be trouble but I don't believe I've done anything wrong so I move ahead. Also gives me a realistic ROI which is not good at 14.8c/kwh from power company here in Oregon.

 

[Zwy]

Well that sucks. I installed all four Mitsubishi this year and I have a credit carried over from last year on the solar. But I have to say, these new units got us through the crazy Texas heat this summer and kept the house frosty so I'm gonna take the hit and be happy.

On audits in general, I'm not a tax professional but I've been audited twice. They picked through every receipt and record looking for something (I beat them both times) but they had no interest in laying eyes on anything. Some of it will depend on whether you're grid tied due to the records there but even with off grid covering only part of the usage there's going to be a drop in the electric bill. Would they dig that far? I doubt it. The real key to any of this is to not have any red flags that trigger an audit. Because sans an audit it doesn't matter what you say. I'm not saying to lie or defraud by any stretch, but if you claim it one year when it was supposed to be another the worst you're likely looking at if audited would be to pay a penalty and any difference in what the tax savings may have been.

In my case, I have some business deductions lined up for the past year that will either be depreciated or 179 expense. I purchased some new equipment and the result will be the tax liability will be reduced. I doubt I will have much for depreciation or 179 expense next year so I will push the additional mini split into next year.

 

[overl4nd]

Agree with @EastExCowboy

I've never been audited, use TurboTax, I'm off-grid, BUT.... I have every single purchase date/time/amount listed in a (quite large) spreadsheet to back up my tax claims. Nearing 500 rows of purchases since 2017 from which I can locate every receipt. I also have detailed solar power production/consumption records to show the system has been working/active over this whole period.

There can always be trouble but I don't believe I've done anything wrong so I move ahead. Also gives me a realistic ROI which is not good at 14.8c/kwh from power company here in Oregon.

I plan to buy the bluetti 3kw system and use it in place of a portable generator to run lights and fridge if there is a power outage.
Since I buy it online, and there is no "install" as such other than it charging off the mains most of the year, the receipts mean the online bill and delivery proof?

 

[EastTexCowboy]

I plan to buy the bluetti 3kw system and use it in place of a portable generator to run lights and fridge if there is a power outage.
Since I buy it online, and there is no "install" as such other than it charging off the mains most of the year, the receipts mean the online bill and delivery proof?

As I read the criteria, your 3k unit meets it. The receipt should be all the documentation needed, but pictures never hurt. Take pictures of it connected to something. You'll never need them most likely but it would back up your position in an audit.

 

[OffGridInTheCity]

I plan to buy the bluetti 3kw system and use it in place of a portable generator to run lights and fridge if there is a power outage.
Since I buy it online, and there is no "install" as such other than it charging off the mains most of the year, the receipts mean the online bill and delivery proof?

I'm counting on it. The tax form doesn't ask for anything, just the total $ amount for the year. And you don't have to 'install solar stuff' for it to qualify in my opinion - for example, I've deducted my DIY battery bank that I built myself including wire, solder, lugs, mounting shelf, etc. And as you expand year by year you can continue to claim additional credits - for example if you buy additional battery units.

Look - I'm not a tax expert, just sharing what I've been doing. Perhaps others will comment and provide better info than I can.

 

[overl4nd]

One more question. Ecoflow Wave II is a heat pump. Can I also add it. Do portable heat pumps count?

 

[Jim in Florida]

One more question. Ecoflow Wave II is a heat pump. Can I also add it. Do portable heat pumps count?

It will depend on its efficiency ratings.

Air Source Heat Pumps Tax Credit

www.energystar.gov

Ductless (mini-splits)

South: ENERGY STAR certified heat pumps with

• SEER2 > 16
• EER2 > 12
• HSPF2 > 9

North: ENERGY STAR Cold Climate heat pumps with

• SEER2 > 16
• EER2 > 9
• HSPF2 > 9.5

 

[parksnorris]

Hi Guys, new to the forum and not sure if this was the right place to post this, please move it if necessary. I am interested in installing solar to try to lower my electric bill and have battery backup in case the grid goes down (temporary or grid attack). I want to purchase solar soon just to have it in my possession (incase of future supply chain issues or grid goes down I can do a temp setup) while I wait for the My Safe Florida Home grant program to see if I qualify for a grant to replace my roof. My questions/concerns are:

If I buy a solar system this year but don't get it "legally" installed until next year do I take the tax credit this year or next year?

Can out of state diy solar suppliers eliminate the sales tax for my Florida purchase. Looking at Signature Solar if that matters.

If I opt to just get solar panels this year (due to budget) and next year add batteries am I able to take the sc solar tax credit again for the batteries?

Any help, info or insight would greatly appreciated.

Hi.
Can someone please help me clear my confusing on solar tax credit.
Total system cost of about $10,000 x 30% (credit) = $3,000 in tax credit
Each year, due to 3 kids and a mortgage. I get about $6000 in federal tax refund. Should I change my withholding (increase allowances) so that I owe the government money and use the $3k in credit or do nothing. Based on my reading, withholding has nothing to do with the tax credit and tax liability.

For example:

Let's say this year I made $100,000 with no deductions and my tax bracket is 30% = $30,000 in tax liability. If my employer withhold $40,000 (withhold) - $30,000 (liability)= $10,000 refund check. Since I have $3,000 in solar credits, my tax liability becomes $27,000? Which means $40,000 (withhold) - $27,000 (liability) = $13,000 refund check? Am I correct? If that is the case, then there is no point in changing the number of allowances and risk getting audit. I am pretty sure my tax liability even after all deductions are more than $3,000.

Thanks

 

[time2roll]

Hi.
Can someone please help me clear my confusing on solar tax credit.
Total system cost of about $10,000 x 30% (credit) = $3,000 in tax credit
Each year, due to 3 kids and a mortgage. I get about $6000 in federal tax refund. Should I change my withholding (increase allowances) so that I owe the government money and use the $3k in credit or do nothing. Based on my reading, withholding has nothing to do with the tax credit and tax liability.

For example:

Let's say this year I made $100,000 with no deductions and my tax bracket is 30% = $30,000 in tax liability. If my employer withhold $40,000 (withhold) - $30,000 (liability)= $10,000 refund check. Since I have $3,000 in solar credits, my tax liability becomes $27,000? Which means $40,000 (withhold) - $27,000 (liability) = $13,000 refund check? Am I correct? If that is the case, then there is no point in changing the number of allowances and risk getting audit. I am pretty sure my tax liability even after all deductions are more than $3,000.

Thanks

Yes adjust your withholding to reduce your refund. The 30% is a credit toward the total annual tax that the IRS keeps. If you pay in extra that always comes back.

Even if the net amount paid is less than $3,000 the credit rolls forward to the next year until used up. So if the IRS is otherwise keeping only $1,000 then it will take three years to fully realize the solar credit.

 

[DIYrich]

If you don't need the cash now, don't change anything. Take the credit and get a larger refund.

Changing your allowances won't increase your audit risk if you get a refund. Might want to increase your allowances to reduce the refund amount. Unless you like the forced savings. Nothing wrong with that.

 

[Zwy]

Hi.
Can someone please help me clear my confusing on solar tax credit.
Total system cost of about $10,000 x 30% (credit) = $3,000 in tax credit
Each year, due to 3 kids and a mortgage. I get about $6000 in federal tax refund. Should I change my withholding (increase allowances) so that I owe the government money and use the $3k in credit or do nothing. Based on my reading, withholding has nothing to do with the tax credit and tax liability.

For example:

Let's say this year I made $100,000 with no deductions and my tax bracket is 30% = $30,000 in tax liability. If my employer withhold $40,000 (withhold) - $30,000 (liability)= $10,000 refund check. Since I have $3,000 in solar credits, my tax liability becomes $27,000? Which means $40,000 (withhold) - $27,000 (liability) = $13,000 refund check? Am I correct? If that is the case, then there is no point in changing the number of allowances and risk getting audit. I am pretty sure my tax liability even after all deductions are more than $3,000.

Thanks

Not possible for $30K in taxes with 3 dependents and $100K in income. Dependents are $1250 each and married filing jointly is $27,700 for a total of $31,450 from $100K. Comes to $68,550. .

Taxes on that would be $8,226. The $3,000 tax credit leaves a liability of $5,226. The mortgage interest will reduce that liability by 12% for each dollar of interest paid.

As to changing your withholding, you should. Letting the government borrow your money at 0% interest for a year is foolish. You could instead get a return of at least 5% in money market right now. If your mortgage is financed over 5%, use the extra withholding (no longer being withheld) towards your mortgage payment every month. This amount goes straight to reducing principal. Over 20 or 30 years, the interest on paying off the mortgage early pays off as the savings accumulate. If your mortgage interest rate is lower than 5% (let's say 2.25% for 30 years, invest in the money market and apply that interest to your mortgage after a year.

Have your withholding reduced to a minimum.

Once you are debt free in life, you will find your money accumulates quite quickly. Even if you are only paying 2.25%. My father rented a farm on a 50/50 share lease that was owned by a retired bank president. Early on the banker told my father that banks make their money by stringing out young people on debt and those people spend the rest of their life working to pay back the bank. Don't do it he said, pay off your mortgage as fast as you can, borrow other money if needed for only short periods and pay it off as quick as possible. Stay debt free and you will do well. My parents did quite well, they were getting 18% interest back in the 1980's while others were struggling to make their payments.

 

[DIYrich]

As to changing your withholding, you should. Letting the government borrow your money at 0% interest for a year is foolish.

Not optimal, but for some people it is the only way they can save. You do the best you can.

Early on the banker told my father that banks make their money by stringing out young people on debt and those people spend the rest of their life working to pay back the bank.

Until you learn how to use other people's money to make more money. The trick is knowing when you can make more on it than what the bank is charging.

 

[JoeHam]

If you don't need the cash now, don't change anything. Take the credit and get a larger refund.

I don’t think that’s how it works.

The credit will carry forward until you owe taxes.

Simply reduce withholding and get the benefit ASAP.