So, I just signed on to have a 6.08 kW solar system installed in March of 2022 on my Littleton, Colo. townhome roof. That is the good news ☀️
The less good news is that Federal Solar Tax Credit, which is a “non-refundable ITC (Investment Tax Credit)” is, well, confusing as hell, at least to me.
According to the ARE Solar proposal that lists the cost of my system, I am eligible for a tax credit of about $5,400 based on the total system installation cost of approximately $21,000.
But here is the catch, at least as I (mis)understand it: I must OWE the Federal Government at least $5,400 at the END of the tax year of 2022 in order to claim that full credit. Or, I must OWE something in order to be able to take partial advantage of that $5,400 credit.
The problem: I never owe taxes. I always get a refund. This has to do with the withholdings I establish on my W-4, I believe. Although, I have read that the form has been changed recently and that one does not establish withholdings any more (in the same way).
How the heck do I get to where I OWE the Federal Government $5,400 in 2022?
Based on the fact that the Federal Government took about $6,300 out of my paycheck for 2020, I guess I need to set things up to where the feds take $75 per month out of my check, or A LOT less than the $525 they took out montly during 2020.
How the heck do I do this?
AND, am I going to be on the line for some kind of “under-payment” penalty if I am, in fact, able to make it so that only $75 in federal taxes is taken out of my 2022 paychecks on a monthly basis?
Anyone out there actually know what they are talking about on this?
How do I set myself up to create at least a $5,400 federal tax liability for 2022 without possibly being penalized for “under-payment”?
Yes, I know I can carry over the tax credit — until 2024, at which time, the Federal Solar Tax Credit might go away. So, I don’t need to have a tax liability of $5,400 all in one year.
Of course, if I can set it up that way, I sure would like to do so, because that means I get my money “back” more quickly. Really, I don’t get any money at all back — I just don’t have to pay $5,400 worth of Federal Taxes that I would have otherwise had to pay were I not taking the Federal Solar Tax Credit.
ALSO, why the hell does the Solar Federal Tax Credit have to be so complicated, set up so that it requires a tax liability reset, and a major one, probably for 80%+ of people who want to claim it? 🙄