I have a question. As I understand it the Home Energy Credit is a non refundable credit meaning if my tax liability is 10,000 and I have a 12,000 credit (30% credit) of expenditure on solar panels then my tax liability is zero and I do not get back the additional 2,000. Is this correct?

What if I am due a refund already? Am I still eligible for the full 30% credit?

Also if I spend the money in 2013 but the system isnt installed until Jan 1st how does the IRS know the system wasnt placed into service in 2013?

#1:The nonrefundable Residential Energy Credits are available for individuals who make energy-conscious improvements to the energy efficiency of their home. There are two credits:The Nonbusiness Energy Property Credit, claimed on Part 1 of Form 5695, is for physical improvements to the home building itself. This covers energy-efficient insulation, doors, windows, heaters, air conditioners and the like; The Residential Energy-Efficient Property Credit, claimed on Part 2 of Form 5695, is for investments in alternative energy, such as solar, wind, geothermal and fuel cells.Residential energy tax credits do have limits. The IRS considers the credits non-refundable, which means you can’t claim more in credits than you paid out in federal income taxes. You may be able to carry forward some of your surplus uncapped tax credits to future years. This can be a significant benefit as it allows you to benefit from the credit for more than one tax year.

#2;As mentioned above. Tax credits are subtracted from the amount of tax you owe. In most cases, if a tax credit reduces the tax you owe to zero, you gain no additional benefit from the credit, but in the case of solar energy credits, you can carry excess credits over to future tax years.


#3;The expenses must be paid or incurred in the current tax year of 2013 even if the system was placed into service in Jan of 2014 t deduct on your return.So you can deduct any residential energy property costs paid or incurred in 2013.