Yes. The California electric vehicle rebates are taxable on both the federal return and the state of California return.
This is true because of IRC section 61: Gross income means all income from whatever source derived unless specifically excluded by law. A rebate is normally excluded from gross income when it is treated as a reduction in the purchase price of a product or service. However, the California electric vehicle rebate comes from the California Clean Vehicle Rebate Project (CVRP), which is administered by the California Center for Sustainable Energy for the California Air Resources Board. Therefore, the rebate is issued in a transaction wholly separate from the purchase of the vehicle and cannot really be considered a reduction in the purchase price of the vehicle.
For California purposes, California conforms to IRC section 61 and does not provide a specific exclusion for the CVRP rebate, so the rebate is taxable in California too.
This income will be entered on line 21, form 1040 as other income. Then it will be carried over to the state return. Please follow the directions below to enter your rebate income into the TurboTax. (see screenshots for reference)
- Click the Federal tab
- Click Income & Expenses
- Scroll down to Less Common Income and select Miscellaneous Income (drop-down menu)
- On the next screen, click start next to Other Reportable Income
- On the next screen, select yes.
- You are now on the income input screen. Enter the description and amount.
