Energy-related ‘rebates’ not taxable income: IRS

Energy-related 'rebates' not taxable income: IRS

Taxpayers who receive “rebates” — as the Inflation Reduction Act describes performance-based incentives and electrification product subsidies for the purchase of energy efficient homes — will generally not have to include those rebates as income on returns. 

They will, however, need to reduce the basis of the property by the amount of the rebate when they sell the property.

Announcement 2024-19 addresses the federal income tax treatment of amounts paid for energy-efficient property and improvements as part of the Home Energy Rebate Programs of the Department of Energy under Sections 50121 and 50122 of the Internal Revenue Code.

Sign in front of IRS building in Washington, D.C.

Pamela Au/wingedwolf – Fotolia

The announcement also provides coordination rules for taxpayers who receive such amounts and claim a federal tax credit under Section 25C.

Among other points:

  • If a rebate is at the time of sale, the amount in connection with the Home Energy Rebate Programs is not included in a purchaser’s cost basis. If provided later, the rebate is an adjustment to basis.
  • Rebates to a business taxpayer are includable in that taxpayer’s gross income.
  • Rebates of $600 or more to a business taxpayer that are includable in that taxpayer’s gross income and are not attributable to gross receipts from sale of goods may be subject to information reporting.

More about IRA energy-related tax benefits is here.

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