Enery Tax Credits

Forum|Forum|5 years ago
July 10, 2020
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I have conflicting information for the Home Energy Credits. One statement (in two locations) says, "Eligible homeowners can claim both of these credits when they file their 2019 federal income tax return. Because these are credits, not deductions, they increase a taxpayer's refund or reduce the tax he or she owes." (Blue Highlighting provided by me).

Elsewhere on the information page it states, "This credit is nonrefundable, which means the credit amount you receive will not exceed the amount of tax you owe. Therefore, there is no refund."

Which of these statements are true?

Thanks,

Larry , Longwood, FL

AnnetteB6

Both statements are true. Here is an example that might help.

Suppose the taxes owed is $1000. Your withholding from W-2s is $2500. This would leave a refund of $1500 ($2500 - $1000).

If the energy credit amount was $500, then it would reduce the taxes owed by $500 and leave $500 for the taxes owed. Then, subtract the taxes owed from the withholding and the refund would be $2000. Thus the energy credit would increase the refund in this case.

Now, suppose the energy credit amount is $1500 and the taxes owed is still $1000. In this case, the energy credit can only reduce the taxes owed to $0, but no more. That's what it means to be non-refundable. The $500 of energy credit that is not used to reduce the amount owed is simply lost -- it does not add to the refund. Therefore, the amount of credit will not exceed the amount of tax you owe. But, even in this case, the refund was increased by the $1000 of energy credit that was used because all of the withholding would be refunded since the taxes owed is $0 after taking the energy credit into account.

@patriot-use

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