I have been considering getting a solar system added to the house. I am 64 collecting SS. I did not have a tax bill last year to pay. My thought is in order to get the 26% tax credit I could do a Roth conversion so that I had tax liability. First of all does this sound like a good idea? Second I would need guidance in just how much to convert to put me in the right range of tax liability. Thanks for any help. Hopefully enough info to get started.
Roth Conversions and Solar credits
- Thread starter afntrn56
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We essentially did that with the electric car credit. Voluntarily creating a tax liability with a Roth conversion should also work with solar, unless they have a special MAGI calculation.
I'd try an online tax calculator or your tax software from 2019 to figure out your projected tax liability for 2020. If you use the standard deduction and no other credits (foreign tax?) or deductions it should be easy to estimate.
I'd try an online tax calculator or your tax software from 2019 to figure out your projected tax liability for 2020. If you use the standard deduction and no other credits (foreign tax?) or deductions it should be easy to estimate.
SecondCor521
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Note that the residential form of the solar tax credit on the federal level expires in 2022, so I'm fairly certain you'd have to have the system installed by 12/31/2021 (unless the government extends the credit).
Also remember that a Roth conversion may make a portion of your SS taxable. This is, of course, what you are aiming to do, but my point is that to properly do the calculation you want, you'll either need to fill out the appropriate SS taxability worksheet and/or use a tax program to get the numbers right.
I believe the federal tax credit is just 26% of the installed cost. Installed cost probably includes parts and labor, but you should double check that.
Also remember that a Roth conversion may make a portion of your SS taxable. This is, of course, what you are aiming to do, but my point is that to properly do the calculation you want, you'll either need to fill out the appropriate SS taxability worksheet and/or use a tax program to get the numbers right.
I believe the federal tax credit is just 26% of the installed cost. Installed cost probably includes parts and labor, but you should double check that.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Figure out the 26% credit first. Then use this calculator to figure out your taxes with you SS, any other income that you may have and your Roth conversion. Play with the roth conversion until the tax is equal to the credit.
Or input the credit in the credits section and play with the Roth conversion until the net tax is $1.
https://www.dinkytown.net/java/1040-tax-calculator.html
Or input the credit in the credits section and play with the Roth conversion until the net tax is $1.
https://www.dinkytown.net/java/1040-tax-calculator.html
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RunningBum
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You could, but if you don't need the money right now, it's better in a Roth because all gains and dividends in a Roth are never taxed.
Ed_The_Gypsy
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
We did exactly that. Used TaxCaster to optimize the conversion.
We both installed solar and bought an e-vehicle (Bolt) in 2019, so we had two credits. Taxable income was both part-time online work and 403b withdrawals, which I'm doing to the top of the 12% tax bracket (unused funds are stashed in a broker account not a Roth, but the same idea).
A small credit amount was unused in 2019 tax filing, since the credit exceeded taxes due, but you can roll over the unused amount to use against next year's taxes. I think our roll-over was less than $500, so not significant.
We're enjoying not paying electric and not paying gasoline for the Bolt, although we used capital (I think the payback period is 7.6 years, assuming we drive the Bolt at least as much as this year, which is an easy goal, since we're driving less due to COVID).
https://www.energy.gov/sites/prod/f...deral Tax Credit for Residential Solar PV.pdf
A small credit amount was unused in 2019 tax filing, since the credit exceeded taxes due, but you can roll over the unused amount to use against next year's taxes. I think our roll-over was less than $500, so not significant.
We're enjoying not paying electric and not paying gasoline for the Bolt, although we used capital (I think the payback period is 7.6 years, assuming we drive the Bolt at least as much as this year, which is an easy goal, since we're driving less due to COVID).
https://www.energy.gov/sites/prod/f...deral Tax Credit for Residential Solar PV.pdf
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KarlH
Recycles dryer sheets
Another thought if you haven't figured out the specifics of your system is getting an inverter that is also a car charger. On top of the Solar credit, you can claim the inverter as a separate credit for installing an electric car charging system. Solar edge makes one of these dual use inverters, and it will likely add value to your home, even if you don't get an electric car.
