I was finally able to take stock of my estimated taxes for next year, and compute how the solar energy credit would work for me. Sad to say, the devil is in the details: while I was hoping to be able to take a tax credit to recoup 30% of the cost of our solar panels, it won’t quite work out that way. For this coming year, I will be able to take less than one third of that. The rest I will have to carry forward to future years.
I am disappointed about that, and a bit surprised. But before we installed the panels, I wouldn’t have even known how to ask the questions to discover all this. In the literature on solar, it was always expressed as “may be able to get 30% of cost as a tax credit, but consult a tax professional.” I had just assumed that it would work to take the credit this coming year, because I knew my tax bill is generally higher than 30% of the solar cost. But I think I got caught in the peculiar way that minister’s taxes are computed.
Ministers are counted as “self-employed” for social security, so we pay 15.3% of our total compensation toward social security self-employment taxes. Most employees have 7.65% withheld and the other 7.65% is paid by the employer. (On the other hand, ministers get a break on our housing allowance, so that tends to even it out.) What ends up happening for me, though, is that the largest part of my actual tax bill is the social security self-employment tax. And I did not realize that the solar tax credit could not be used against that tax, but only the regular federal taxes.
I share all this because I am guessing that some of my ministry colleagues might have an interest in installing solar panels, since you share the same values I hold about caring for the earth and using renewal energy. I wanted to warn you that you might not be able to count on getting that money back in the first year. Plus, I can see how this makes it even harder for solar panels to be affordable for lower income folks. The lower your income, the lower your taxes, and the more years it may take for a rebate to actually come back to you.
Personally, I’ll be okay financially. And I don’t regret having installed the solar panels, even with this and other political setbacks. But I sure was looking forward to having that rebate for other house projects that are waiting in line. So it goes.