topic SRECs generated from home solar syste in Deductions & credits

SRECs generated from home solar syste

vdots — Fri, 12 Mar 2021 19:11:43 GMT

I installed solar panels on my home roof in 2019. I generated Solar Renewable Energy Credits (SRECs) which were sold in energy credits market by a SREC trading company on my behalf. Are those sales taxable, federal or Maryland state? If so, should I be getting some sort of 1099 from my trading company that made the payments to me?

Re: SRECs generated from home solar syste

JohnW152 — Sun, 14 Mar 2021 19:59:38 GMT

Yes, Solar Renewable Energy Credits are taxable, on both your federal and state returns.

The sales are typically reported on Form 1099-MISC. The form is generally issued to income recipients if at least $600 in income has been received.

However, the income must be reported, even if you don't receive the 1099-MISC.

Following Irene2805's advice from this page, you'll enter this income using the following steps:

Click on Federal > Wages & Income
In the Less Common Income section, click on the Start/Update box next to Miscellaneous Income, 1099-A, 1099-C
On the Miscellaneous Income screen, click on the Start/Revisit box next to Other reportable income.
On the Any Other Taxable Income? screen, click the Yes box.
Enter the income on the Other Taxable Income screen, along with a description. Click Continue.
You will be brought to the Other Miscellaneous Income Summary. If you have no more miscellaneous income to report, click Done.

Re: SRECs generated from home solar syste

vdots — Sun, 14 Mar 2021 20:08:44 GMT

Thank you so much for clarifying this! A related question I have is: my utility company cuts me a check annually for any excess energy I generated during the preceding 12 months. I assume that will also be considered miscellaneous taxable income?

Re: SRECs generated from home solar syste

WendyN2 — Mon, 15 Mar 2021 17:06:36 GMT

Yes, it would be considered Miscellaneous Income - you would report this under the "Miscellaneous Income" section and go through the questionnaire step by step to ensure that the system does not "think" this money should be allocated to a Schedule C.

Re: SRECs generated from home solar syste

vdots — Tue, 16 Mar 2021 19:29:57 GMT

Thank you so much for a prompt response!

Re: SRECs generated from home solar syste

BCinDC — Mon, 07 Feb 2022 13:42:07 GMT

Hi there - bringing this old thread back to life with a new question about SRECs. I received $1,600 in SRECs this year, which I will claim on my taxes (though I have not yet received a 1099 yet from the company that purchased them). However, I also had $1,495 worth of repairs to my system in January (I had to replace my inverter), so my net income after repair costs was only $105.

Can I deduct the repair costs from the income? And if so, how do I do this? Do I just claim $105 as Miscellaneous Inocme somewhere? Or is there a different way to show it?

Re: SRECs generated from home solar syste

PatriciaV — Tue, 08 Feb 2022 19:05:21 GMT

@BCinDC

No, repairs to major components of your home are not tax-deductible. The cost to maintain your solar energy system cannot be used to offset the income you received from Solar Renewable Energy Credits. Please see the post in this discussion from JohnW152 for instructions on how to report your SREC income.

Re: SRECs generated from home solar syste

greatgoogly — Sun, 05 Mar 2023 18:10:16 GMT

In the 2022 Turbo Tax the field suggested in the solution now says specifically NOT to enter information from 1099-MISC here.

Re: SRECs generated from home solar syste

AbrahamT — Mon, 06 Mar 2023 21:25:37 GMT

Right, your'e talking about this screen

Here's what you do

1- On the right, in the magnifyig glass type in 1099misc

2- After that, you'll see a link Jump to 1099 misc

3- then this screen will pop up

click yes on the bottom right hand corner. That's where you enter it.

Re: SRECs generated from home solar syste

bm46 — Sat, 11 Mar 2023 17:24:23 GMT

Aren't some repairs to home deductible where a person is taking a dediction for home office deduction. Also, isn't a portion of roof repair deductible as rental expense, where roof is for an up and down unit duplex, where one unit is residence of taxpayer in question? I realize neither of these two situations specifically aligns with the situation involving energy credit sale. However, is there reason to only limit repairs to one's home to these two situations, as partially deductible? Also, what would be considered "major repairs"?

Re: SRECs generated from home solar syste

AbrahamT — Mon, 13 Mar 2023 15:42:14 GMT

So here's the deal with the home office deduction. If it is deals with cosmetic changes or changing the flooring or painting, then you may simply take it and expense it as it relates to the home office exclusively, not to the actual house itself. . However, if it deals with major repairs like a roof repair which brings your roof to back to a state of suitable for a proper roof, then that would be considered a capital improvement subject to a depreciation life of 27.5 years adjusted for the rental portion. You also have the option of adding it to the cost basis of your home and deperciating it over the remaining life of your home. A third option would be to take a Section 179 depreciation in which case you can fully expense the entire cost of the roof repair.

Re: SRECs generated from home solar syste

LaurieHur — Wed, 15 Mar 2023 22:04:55 GMT

My solar company doesn't give me a 1099-MISC for my SREC credits, but I can pull the information up on their web site. Do I report the total sales or the net sales, which is total sales minus fees?

Re: SRECs generated from home solar syste

PattiF — Wed, 15 Mar 2023 22:39:19 GMT

You would only report the net sales.

Follow these steps in TurboTax Online:

In the Federal section, under Your income and expenses
Scroll to Other Common Income
Select Form 1099-MISC
Follow the Prompts and enter amount in Box 3, Continue
Describe the reason for this 1099-MISC box
Do any of these uncommon situations apply? check last box
Select No, it didn't involve work like my main job on Did the SREC involve work that's like your main job?
Answer How often did you get income...Although you may receive this income every year, say that you only receive the 1099-MISC only in 2022, not in previous years and not in 2023, you will then have the screen where you can say that it did not involve an intent to earn money.
Select No on Did the SREC involve an intent to earn money?

Re: SRECs generated from home solar syste

LaurieHur — Wed, 15 Mar 2023 22:51:20 GMT

Thanks!

Re: SRECs generated from home solar syste

fp7 — Sun, 19 Mar 2023 18:29:17 GMT

Are SREC payments taxable income if your solar system hasn't generated a profit yet? In other words, I have spent more money on my solar panels than I have earned back in savings on my electric bill, SREC payments, and the federal tax credit. Should I still declare my SREC payments as income on my federal tax returns?

Re: SRECs generated from home solar syste

AbrahamT — Mon, 20 Mar 2023 17:06:48 GMT

So these are two different departments. On the solar panels themselves, you may take a tax credit of upto 30% of the cost of the equipment. See HERE Pg 1. Any unused credit can be carried forward indefinitely. See HERE

The SREC income that you received from these panels should be declared seperately on a 1099MISC as per JohnW152 discussed earlier.

[Edited 03/20/2023 10:06 AM PST]

12:32

I am so happy to hear that!

Re: SRECs generated from home solar syste

MikeyV — Tue, 18 Mar 2025 05:43:34 GMT

I have a follow up question to this answer. According to Carbon Solutions Group, the entity that issues the SREC payments in IL, SREC payments should NOT be considered taxable under the following premise:

"We have been advised by our accountant that there is no need for us to send out 1099’s to our customers.

The reasoning behind this is that REC income is offsetting an investment made in solar, and as long as the overall investment has not become profitable, the REC payment does not impact your income taxes.

If you have begun to profit from your solar system through claiming incentives or any other reason, then you should report it to the IRS and pay taxes on the revenues.

That being said, why would an SREC payment be taxable income if the cost of Solar is significantly more than the SREC payment?

Re: SRECs generated from home solar syste

ThomasM125 — Fri, 21 Mar 2025 13:57:46 GMT

I couldn't find anything in IRS literature addressing the deduction of the purchase or maintenance costs associated with your solar panels. I suspect they are not deductible, as is the case with other home related purchases, repairs and maintenance costs.

@MikeyV

Re: SRECs generated from home solar syste

MikeyV — Fri, 21 Mar 2025 15:21:13 GMT

Thanks for the reply, my question was not so much about the deduction of the cost of the panels. It was specifically regarding the SREC contractual check that is received as a result of the electricity the panels generate. Should this be considered reportable income?

I have researched this quite a bit and found conflicting answers. It is true IRS does not specifically state anything on this topic. My thought is how can it be income of the check is significantly less than the cost of the panels? According to the entity that provided the check, it should not be considered income so long as the check received does not exceed the cost of the panels...as stated in my original question. Sounds logical to me. Then why are so many "experts" stating it is income even if there was no profit made?

Re: SRECs generated from home solar syste

ThomasM125 — Mon, 24 Mar 2025 17:45:11 GMT

The IRS considers all income to be taxable unless specifically excluded from tax. Assuming they haven't done that here, your only argument would be that you are running a business and the cost of the panels is ordinary and necessary for the business that you are operating. That may be hard to argue as I assume the main purpose of the panels is to generate power for your house, which is not a business activity.

Another issue is the energy credit afforded you by purchasing the panels. The IRS does not normally allow you to deduct the cost of something while at the same time affording you a credit based on the same cost, as that would be considered "double dipping." So to the extent the cost of the panels was used to qualify for an energy credit, you could not also use that cost to reduce the taxability of income generated by the panels.