Residential Energy Efficient Property Credit

[JHUMPHCPA13]

I have a client, retired couple, that purchased and installed solar panels under the understanding that they would receive a discount on their note due to a tax credit.  They originally filed their taxes themselves and came to me for an amended return because their note went up and the finance company told them to amend their return.  They are already in a refund position and the REEP is non-refundable.  From what I can understand from the clients, the finance company told them that the tax credit would go to the finance company (sounds like as a subsidy of some sort) once the client files and receives the REEP.  I don't know if I am missing something but I can find no support or information on anything like that.  I think they got scammed but is there another credit that I am unaware of that could support something like that?

[Terry53029]

Maybe they are talking about a state credit, I am not aware of any federal credit that would be paid to anyone but taxpayer

[TaxGuyBill]

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@JHUMPHCPA13 wrote:

 receive a discount on their note due to a tax credit.  They originally filed their taxes themselves and came to me for an amended return because their note went up and the finance company told them to amend their return. ... the finance company told them that the tax credit would go to the finance company (sounds like as a subsidy of some sort) once the client files and receives the REEP

They are already in a refund position and the REEP is non-refundable. 

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It sounds like part of the contract they signed with the finance company said that a lump-sum payment would be due on the loan (the amount of the solar credit they received).

However, you MIGHT be misunderstanding something.  "Refund position" does NOT necessarily mean they don't qualify for "non-refundable" credit.

Simplified example:

Tax return shows $5000 of income tax.  Taxpayer had $6000 of withholding.  The are getting a refund of $1000.

If the clients' solar costs would qualify for a $13,000 credit, then $5000 is applied to the $5000 of income tax.  It doesn't matter if they had withholding resulting in a refund.  They still get to apply the $5000, so now their refund will be $6000.

The other unused credit of $8000 ($13,000 minus the $5,000 that was used) is carried over to next year.

[JHUMPHCPA13]

They qualify for the child tax credit (3 dependent children) which is more than their tax liability.  The entire amount of the REEP credit (13k approx) is carried over to the next tax year.