DeveraC
Level 3

Hi, all. I have a cranky client who doesn't believe me when I tell him that his $26K solar energy credit is not allowed to reduce his self-employment taxes. He had a federal tax liability of $1851 (which is now zero due to his solar energy credit.) However, he has a self-employed business and his SSA/MC taxes on that are around $2600 and since his federal liability is zero after the credit, he still owes the SSA/MC on his return. I have tried to explain to him that self-employed taxes don't work the same way federal taxes work. Can anyone help me find in the regs where it states this? I've tried to explain to him that it is a non-refundable credit that can be carried to future years, but he won't accept it. He said his contractor (who installed the solar panels) and his financial advisor both said it should wipe out his liability. 

 

OR.... am I completely missing something on the 5695??? Good grief. This tax season has been a nightmare.