How do non-refundable tax credits combine with fully refundable tax credits

Question

I am considering purchasing a solar system for my house. I didn't do it last year, because I projected my income tax liability to be less than $1k after the child tax credit due to the fact that I have many children. So it would take quite a few years to recover the ~$10k of tax credit. However, the child tax credit recently became fully refundable. So now I don't know how to calculate how much I could use of the solar tax credit.

IE - if:

• I have a total of $15k in income tax liability for 2022
• My child tax credit is worth $15k
• My total solar credit worth $5k

can I claim them both and get $20k for a return?

Answer 1

The solar tax credit comes after the child tax credit, so if your child tax credit wipes out your tax liability you can't use the solar tax credit this year.

See the worksheet for line 14 on the Form 5695 instructions:

If the sum of the listed credits is greater than your tax liability then you enter 0 on line 14, and line 15 (the credit) takes the lesser of lines 14 and 13.

You can carry forward unused credit.

Answer 2

If you don't see yourself having any federal tax liability for the next several years, consider a solar lease or power purchase agreement. That way, the installer reaps the tax credit and passes savings to you.

This article says that a PPA can be bought out early by the homeowner, e.g. after 7 years, once the installer has benefited from the tax credit.