Today TaxMama hears from Jean in Glendale, CA. She says, “I installed a photovoltaic solar system on our home last spring. We received an $11,000 “incentive” grant from the City. Now, the City has sent us a 1099-G. I thought solar installations were not taxable.”
That’s an excellent question.
You’re right, the incentives are not taxable – at least not when you get the money for solar systems on personal property. But the grants are taxable for business.
So if you are using part of your home for business, multiply the grant by the business percentage of your office in home. That amount will be taxable.
Remember, when you prepare your income tax returns this year, you may also have access to an IRS tax credit. (California’s credit seems to have expired.)
Reduce your total costs by the $11,000 you have received from your city.
Use Form 5695 for your IRS credit
And remember, you can find answers to all kinds of questions about energy credits and other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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- Database for State Incentives for Renewable Energy :: Analysis of the Taxability of Solar Incentive Payments
- IRS Form 5695 :: Residential Energy Efficient Property Credit