In 2020 received Federal tax rebate for solar batteries

[drbbh246]

Power company rebate is cash, part of California program called SGIP. This rebate decreased cost of installation by more than 1/3.  The problem is that it came in the tax year after the installation.

[KrisD15]

You can refigure the 2020 credit and add the difference on your 2021 tax return as "Energy Credit Recapture" income on your 1040 Line 8 (Other Income). 

[drbbh246]

Thank you for responding! Could you expand your answer so that I can understand and implement it? Particularly, "You can refigure the 2020 credits and add the difference on 2021 return" is not clear to me. I know the tax credit i calculated and received for 2020 based on the cost of the system, and I know the amount i received as rebate from electrical company in 2021. Could you kindly be explicit about how i should refigure for my 2021 return?  I apologize for my lack of knowledge about taxes.

[PattiF · Accepted solution]

The payment that you received from the power company won't be considered taxable income for you. But you will need to determine what the energy credit that you received on your 2020 tax return would be with the reduced cost of installation from the rebate.

To do that you can go to your 2020 tax return in TurboTax and start to amend the return. You will not be filing an amended return (1040-X) but will use the program to see what the credit for home energy on Form 5695 will be after you enter the lower cost of installation.

Here are the instructions on how to amend the 2020 tax return.

After you have entered the lower cost of installation, the revised credit will be on Schedule 3, Line 5, Residential energy credits, Form 5695. Deduct that amount from the credit that you originally received to find the amount to enter as Other Income for 2021.

Here are instructions to enter Other Income:

To enter Other Income, please follow the steps below:

1. Open your return.
2. Click on Federal Taxes.
3. Go to Wages & Income
4. Scroll to the bottom under Less Common Income select Start (or Update) for Miscellaneous Income.
5. Choose the appropriate category and enter your Other Income

[drbbh246]

Awesome! Thank you very much.

[PattiF]

You are welcome!

[drbbh246]

Hello PattiF. Followed your instructions. In round numbers I got a 9,000 tax credit in 2020. Amended for the actually cost decreased the credit to 6,000. My understanding is that I should report the difference, ie, 3,000, as income in 2021. 

I want to make sure i understood this correctly because it makes me uneasy. I saved 3,000 in taxes in 2020 because i did not get the energy company rebate until 2021.  when i report the 3,000 as income, that will add taxes in 2021 of 3000 x 0.24 (my tax bracket) = $720. Is this right? 

thank you

[DawnC]

Yes, that is how it will work out.   You are claiming the $3k of other income because last year, you took a $9K tax credit that should have only been $6K.   You report the $3K as Other Reportable Income (Miscellaneous Income) in TurboTax.   The income will show up on Line 8 of Form 1040.   

[drbbh246]

thank you. Seems to good to be true but I accede to your expertise.

[MD8399]

This doesn't seem right to me. I would only be paying tax on $800 instead of repaying an $800 tax credit. I am not a tax expert but it seems to me that it should be entered on Schedule 2 line 17z as additional tax.