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Carry-over of residential energy credit from year filing as MFS to year filing as MFJ

Personal Finance & Money Asked on May 30, 2021

I plan to file MFS (married filing separately) this year, because wife’s income is far higher (I’m retired) and I can get some very advantageous use of the 10/12% tax brackets (substantial LTCGs that’ll be taxed at 0% instead of 15%).

Unfortunately it means that I will lose out on $1000 or so of the residential energy credit (solar panels), because my MFS tax liability is less than this "non-refundable" credit. I understand that normally the unused portions of these credits can be carried over to future years. The thing is, we will almost certainly file MFJ (married filing jointly) next year. It’s unclear to me if we’ll be able to use the carryover from my MFS return on our joint return (but if so, we’d be able to fully use them, due to wife’s relatively high tax liability).

I researched some and found that for the foreign tax credit (FTC), pages 24-25 of Publication 514 (https://www.irs.gov/pub/irs-pdf/p514.pdf) actually describe mechanics for carry-back and carry-forward for situations where MFS and MFJ are interleaved. It looks a bit complicated, but the main point is that you’re not screwed, you’re going to be able to take that excess FTC credit at some point.

It’s tempting to think similar rules would apply to the residential energy credit, but I’d like some confirmation (before I make some investment moves that will make MFJ even more disadvantageous).

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