The capital credit payment you received is only taxable if you claimed a tax deduction for the electric costs that led to the payment. This occurs when you use the electricity for business purposes and deduct the cost as a business expense
The electric coop does not know if you are using (and deducting) the electricity for business purposes, so they issue a 1099-MISC with all capital credit refunds.
As previously stated, "capital credits are a refund of prior years’ electric costs and not taxable unless the electric bills were deducted for tax purposes. "
If you did not deduct the electric costs for business purposes, enter the 1099-MISC and an offsetting expense to make sure it is not taxed:
To report the income:
If the 1099-MISC reports income that is not related to your main job or self-employment, enter the information as follows in the 1099-MISC interview:
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Type "1099 misc" in the search window
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Click on "jump to 1099 misc"
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Enter the information from your Form 1099-MISC, and click on Continue
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Enter a description and click on Continue
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On the screen with "Does one of these uncommon situations apply?", indicate "None of these apply"
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Answer "No..." to "Did the [Capital Credit Refund] involve work that's like your main job?"
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Answer "I got it in 2020" when asked "How often did you get income for [Description]?"
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Answer "No, it didn't involve an intent to earn money."
The amount will be reported on line 8 of Schedule 1 (Form 1040).
To enter the adjustment:
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Answer "No" to "Did you receive any other wages?"
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Select "Other reportable income" from the Miscellaneous income list
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Select Add another Income item on the Other Miscellaneous Income Summary screen
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Enter a Description (Capital Credit Refund) and the amount as a negative number, then click on Continue
A corresponding negative amount will be entered, and line 8 of Schedule 1, will be zero.
