Question

Form 5695

Forum|Forum|4 years ago
October 27, 2021
1 reply
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We live in Maine and recently had solar panels installed on our house. We will file form 5695 for this year's federal tax credit for around $10K+. My question is: My husband is self employed and does not pay his quarterlies throughout the year, but instead at filing time - will this federal tax credit interfere with any payments/credits he would be paying for his self employment taxes? For example, if he owes $4K - will the REC5695 tax credit be any part of payment towards his employment taxes? I ask because our loan for the solar panels is partly based on paying back the $10K lump sum in 18 months.

Thank you.

Critter-3

The credit can ONLY negate the federal taxes on the tax return ... it will do nothing for the SE taxes ... he will still owe them as usual.

Critter-3

OK ... one more thing ... the credit is NOT refundable which means it can ONLY negate federal taxes on the return and does NOT increase the refund. So look at last year's return ... did you have a refund on it ? If so look at the federal tax liability ... that is the amount the credit can remove ... then recalculate the return and see if this credit actually increases the refund. Or does it simply reduce your balance due.

If you were expecting a $10K refund on your return to pay off the loan on the panels then you may be very disappointed ... it may take several years to use up the entire credit.