I live in Iowa, and am considering a solar panel install on my house. It is likely the install will take place in 2020 making it eligible for the 2020 state and federal tax credits. I get that I will pay for the cost of the system up front (financing in my case) and that that tax credits are applied after the fact when I file each year. The quote from the installation company assumes a 26% Federal credit and 50% of that is eligible for the State of Iowa, so 13%.
I have 3 kids, make a middle class income, have a stay at home spouse, and am a homeowner, so usually get some money back in taxes each year. Most years I have a small liability to the state, and a reasonable refund from the Feds.
I heard that the credits roll over for a few years, but not indefinitely. I expect over the course of my career I will make more money and my tax bracket (and total tax liability) will go up, but I don't know if it will make a difference soon enough.
Is there a risk that my personal tax liability is not large enough to actually take advantage of the credits? How long of a window do I have to use them?
UPDATE: Here are the numbers
- The total cost of the project is $23,181.
- The Federal Credit is $6,027
- The State Credit is $3,014
- Federal Taxes in 2018 were $4,320 (line 11a of my 1040)
- State Taxes in 2018 were $2,573 (line 39 of my IA 1040)
- I had other deductions and credits, the largest being the Child tax credit. The result was that my withholding is relatively small.