Master Thread: Energy products and Tax discussions

[RKCRLR]

The key phrase here is "by a public utility." As @willow_hiller mentioned, in MD, the grant/rebate is issued from the state, which means it is taxable but does not reduce the ITC credit amount. Interestingly, MD also has a tax credit (not a grant/rebate) for storage, which has yet different federal tax treatment. But, for SGIP, it seems like it would turn on whether the subsidy is really a state subsidy or a utility subsidy, and I do not know enough to say, since it sounds like a state program administered by the utilities. In any case, it does seem odd there is an option to file as tax exempt that would be applicable to anybody other than a non-profit - I would think it would either be taxable for every homeowner or none.

I guess the only other question is what is an "energy conservation measure" since I understand SGIP includes programs for people with medical needs, which might not really be an energy conservation measure, while other programs require recipients to conserve/support the grid. But, I would still think the specific program applied for would define the tax status and not an election by the customer.

I agree if an incentive is not paid by an utility then it is likely taxable (unless that is addressed somewhere else in the code). But SGIP is funded by utility ratepayers, is administered by the utilities, and the check comes from the utility. To me, that meets both the wording and intent of the code as being non-taxable as gross income.
One of the conditions of the SGIP incentive is the batteries get cycled the equivalent of 52 full discharge cycles to the grid per year. Doing this reduces peak demand on the grid which reduces the utilities' need to bring on less efficient power sources. To me, this meets the definition of an "energy conservation measure".

 

[wjgjr]

I agree if an incentive is not paid by an utility then it is likely taxable (unless that is addressed somewhere else in the code). But SGIP is funded by utility ratepayers, is administered by the utilities, and the check comes from the utility. To me, that meets both the wording and intent of the code as being non-taxable as gross income.
One of the conditions of the SGIP incentive is the batteries get cycled the equivalent of 52 full discharge cycles to the grid per year. Doing this reduces peak demand on the grid which reduces the utilities' need to bring on less efficient power sources. To me, this meets the definition of an "energy conservation measure".

That all sounds reasonable to me. The interesting thing is that for most taxpayers (those with taxable under ~$161k for singles/$321k married filing jointly,) it is potentially better if it is taxable at the federal level, because the marginal rate is 24% or less. Where, if it is non-taxable, you lose the 26% because it has to be reduced from the basis of the ITC claim.

I do say potentially, only because it assumes the same state tax treatment. In MD, the solar grant is not taxable at the state level, so the question of which is better is only about comparing one's marginal tax rate to the 26% ITC. If the SGIP taxable/tax-exempt option also affects state tax treatment, then that can change which is better.

 

[h2ofun]

So for the folks who did SGIP last year, and got their check last year, did anyone get a 1099 and had to put this as income into your 2020 taxes?

 

[wwhitney]

It was 3 years ago, but I did get a 1099 from PG&E, and I included a note with my tax return indicating that it was not taxable income since it came from a utility, citing the relevant section of the IRS code. But then for the ITC I reduced my cost for the system accordingly.

Cheers, Wayne