John - My main point was not that "nonrefundable" tax credits are are not refundable if unused to offset income taxes (in your current, or possibly future tax years) but that
they are inherently unfair, and offer the least help to those who might need it most.For many years, the various Federal energy efficiency credits have all been "nonrefundable" - you could benefit from the credit only to the extent they could be used to offset your income taxes otherwise due (as you note, either for the current, or possibly some future years).This provided a great benefit to those in the highest tax brackets - and almost none to those in the lowest brackets.Those credits are, in effect, subsidies for the rich and useless for others whose income taxes are very small (for example, retirees like me) who might want to improve their home's energy efficiency.For residents of states which offer "net metering", we are now at a point where solar PV can be economically justified - even without the solar ITC - for those of us with access to funds at competitive interest rates. But for those less well-off, the solar credit can be the "make or break" deciding factor in whether solar pv is affordable.
Besides the solar ITC, the "Big 5" Federal income tax credits for low-to-moderate income individuals (subject to some some key limitations} are: (1) the Earned income Credit; (2) the American Opportunity Tax Credit; (3) the Lifetime Learning Credit; (4) the Child and Dependent Care Credit; and (5) the Savers Tax Credit.
Of these, I believe only the Earned Income Credit and, (beginning with the 2021 tax year) the Child and Dependent Care Credit are "refundable" – although both have limitations in order to qualify.
If the government's goal with the solar ITC is to encourage more residential pv solar as quickly as possible, or even if it just wishes to be fair to all, regardless of income level, it should make the solar ITC (and other residential energy incentives) "refundable". Only in this way, can those with small (or no) income taxes access the same Federal energy subsidies as those who have higher incomes.
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Hugh Willis
Old Engrs Never Really Retire
GREENSBORO, NC
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Original Message:
Sent: 11-05-2021 10:25 AM
From: John A Lichty
Subject: Solar Credit refund
I noticed a couple of days ago that somebody said the Solar Credit was not refundable. That is partially true, but not the whole picture. If the solar credit exceeds the income tax liability, it is carried forward to succeeding years to be used against future taxes. Therefore, it is technically not refundable, it is still usable in the future, kind of like paying estimated taxes.