topic Received a 1099-Misc from the water district as a REBATE for completing work in our backyard to reduce water. Can we deduct expenses for supplies to complete work? in Deductions & credits

Received a 1099-Misc from the water district as a REBATE for completing work in our backyard to reduce water. Can we deduct expenses for supplies to complete work?

stevejuli — Thu, 06 Jun 2019 09:56:48 GMT

Typically rebates would not be taxable income, so there w...

AnnetteB — Thu, 06 Jun 2019 09:56:49 GMT

Typically rebates would not be taxable income, so there would be no need to deduct the cost of the supplies in order to offset the rebate amount.

However, since the rebate was reported to you on a Form 1099-MISC, the IRS will expect to see it included as part of your return. That does not mean that it should be included as taxable income though, especially since you have all of the receipts and documentation to provide (if asked) that show it was a rebate and not income to you.

Reporting this in TurboTax will be a two-step process, first to include the 1099-MISC as income and then to make a negative adjustment to remove it.

To include the 1099-MISC as a part of your tax return, follow these steps:

On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)
This opens a box where you can type in “1099-MISC” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
The search results will give you an option to “Jump to 1099-MISC"
Click on the blue “Jump to 1099-MISC” link
Answer Yes you did receive a 1099-MISC
Fill in the details from your 1099-MISC then click Continue
Provide a short description for the reason you received the 1099-MISC then click Continue
On the next screen titled, “Does one of these uncommon situation apply?” choose the last option, None of these apply and then click Continue
On the next screen asking if the 1099 involved work like your main job, answer No and click Continue
On the next screen, check the box that you received the income in 2015 and then click Continue
Finally, choose “No, it didn’t involve an intent to earn money” and click Continue
Answer the questions on the next couple of screens to finish the process

Now the income shown on the Form 1099-MISC has been added to your return. Next, it will be “removed” from the return.

Follow these steps:

Go to Federal Taxes > Wages & Income and scroll to the bottom of the screen to the Less Common Income section (expand the section by clicking Show More if necessary)
Click Start or Update beside Miscellaneous Income, 1099-A, 1099-C
Scroll to the bottom of the list and click Start or Update beside Other Reportable income
Answer Yes to move forward
Enter a brief description, such as “rebate adjustment,” and the amount reported on the 1099-MISC as a negative number then click Continue
Click Done

When you see your Form 1040, the amount shown on the Form 1099-MISC will be reported twice on line 21 – once as a positive amount and once as a negative amount.

[edited 3/15/17 10:59 am PST]

Re: Typically rebates would not be taxable income, so there w...

zlark — Mon, 31 Jan 2022 23:52:49 GMT

Can you please tell me if the response is still valid for 2021? My water conservation rebate was over $2,300 and the cost of material and installment was over $20K. I'd like to cancel out the entire $2,300 using your method. of debiting and crediting like amount. Is this still possible? Thank you.

Re: Received a 1099-Misc from the water district as a REBATE for completing work in our backyard ...

JulieS — Tue, 01 Feb 2022 00:18:02 GMT

Yes, if your 1099-MISC shows a rebate, you can use the method above to report it.

Re: Received a 1099-Misc from the water district as a REBATE for completing work in our backyard ...

abctong — Fri, 14 Apr 2023 01:34:23 GMT

I am using the "Forms" in Turbotax. How do you enter the water service rebate's 1099-MISC info into federal tax section for California water rebates? I do not use the Turbotax guided entries in the software.

Update: Found a solution, but could not remove my initial reply in this community. Solution: enter a new 1099-MISC for the rebate paying entity, enter payer information and select "other income" box for the 1099's item 3 amount. This will push that amount to Schedule 1, item 8-z and be accounted for in the return, though it remains taxable. Let me know if this is not a good method.

Re: Received a 1099-Misc from the water district as a REBATE for completing work in our backyard ...

DaveF1006 — Fri, 14 Apr 2023 01:42:29 GMT

Yes, this sounds like a good method because the income is reported in the right spot. Does the text in Line 8Z say this is income reported from a 1099 MISC?

@abctong