I got a rebate check from the Minnesota EV Rebate program and entered it as other income in the federal section. The rebate is not subject to MN tax. How do I remove it

[hoffadg]

I got a rebate check from the Minnesota EV Rebate program and entered it as other income in the Federal Tax section. The rebate is not subject to state tax. How do I remove it from my income in the Minnesota Tax section?

[AmyC]

The rebate check is typically no longer considered income for your tax return. Instead, it reduces your basis in the asset. The IRS has changed several laws around energy efficiency. If you received a 1099-MISC for the rebate, then it would be taxable income.

MN is still updating, see Form availability. If you have taxable income, you should be able to remove it once the program is complete.

[hoffadg]

I clicked on the link and it looks like the MN forms are ready but I still can't find where I can subtract the amount I entered in the Federal section for the EV rebate.  I'm using the online version.

Thanks,

Dan

[DaveF1006]

It depends.  According to this Turbo Tax link, most, if not all these forms, are not ready until Jan 30. Please, check back after that time for an update. 

@hoffadg 

[hoffadg]

According to the link, MN form M1M is ready, yet I still do not see any options to enter the amount I received for the MN EV Rebate Program in 2024.

[DaveF1006]

 You are correct the MN Form M1M is ready but there is no EV rebate mentioned.

 [Edited 02/17/25|10:20 am PST]

@hoffadg 

[hoffadg]

Thanks for the suggestion!  For some reason I am only able to enter $1300 max on this screen.  I received 2 rebate checks for $2500 each, so I need to enter $5000.  Is there another way to enter a number higher than $1300?

[desflurane · Accepted solution]

The Minnesota Department of Revenue neglected to allow  for the  subtraction of the $2,500 EV rebate from Minnesota Taxable Income.

[hoffadg]

This is also the best answer I came up with after asking the MN individual income tax help line.  They more or less said if there isn't a subtraction for it on the M1M, it will flow through from your federal return as adjusted gross income and will be reported on line one of the 2024 Form M1.  When I asked if the EV rebate will eventually be added to the M1M at a later date, I just got a repeat of the message above.

[DaveF1006]

After further research, it seems the intent of the MN EV rebate was to be a dealer rebate. In that case, it's not taxable. If you only received the checks and no 1099-MISC form you don't have to report it. 

If you received a 1099-MISC form then enter the 1099-Misc as received and then also put in a corresponding negative amount in "Less common>miscellaneous income" and describe as MN EV Rebate" Here are the steps.

1. Log into your account
2. Select Wages and income
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7.  Now for the description, put in "1099 MISC Received for non-taxable MN dealer rebate" then represent the amount reported on the 1099 MISC with a minus sign in front. For an example, if the income reported is $5000, record your entry -5000 without a dollar sign. 

@desflurane 

@hoffadg 

[hoffadg]

Interesting.  How were you able to learn this if you don't mind me asking?  I have yet to find anyone in the state offices who knows anything about it.  I did receive a 1099-MISC.  Are you saying it isn't taxable at both the federal and MN state level?

[DaveF1006]

Yes, this is correct. In fact the IRS states that cash rebates are not taxable. Minnesota law, although not specifically addressed, conforms with federal law.  Please read this IRS source regarding taxable and non-taxable income and cash rebates is listed here as non-taxable income.

Now since you received a 1099 MISC, you should report it and then back out of the income as I suggested earlier so that the IRS has a record of your 1099 MISC and that it has been reported. You do not need to make an adjustment in your Minnesota return because an adjustment has already been made in your federal return and reflected in your Minnesota AGI amount. 

[Edited 02/19/25|6:53 am PST] 

@hoffadg 

[hoffadg]

Thanks for the explanation! 

I think my only other question would be how am able to classify this as a dealer rebate when the check came directly from the state?  Per the link you sent:

"Cash rebates from a dealer or manufacturer for an item you buy"

Just trying to make sure I have a leg to stand on if I were to get audited 🙂

Thanks,

Dan

[Wrbcks]

Thanks. I was searching endlessly for an opinion on this EV rebate situation and finally found your post. The IRS and Minnesota Department of Revenue are both frustratingly unhelpful in giving a clear answer to whether or not the EV rebate is taxable. I agree that when you look at the original Minnesota bill, the intent was to give the EV buyer a rebate through the dealer:

Subd. 6. Program administration. Specifies rebates shall be awarded on a first
come, first-served basis. Requires the commissioner of commerce to coordinate
with dealers and other state agencies to develop a procedure whereby rebates
can be made at the point of sale.

However, the rebates were sent to us as well the 1099-MISC which implies that the rebate could be taxable.

If you recall, many states gave rebates to people during the COVID pandemic, and these rebates were not taxable. However, the State of Minnesota approved these rebates 2 weeks AFTER the federal government decreed that the COVID pandemic had passed. As a result, unlike people in many states, we Minnesotans had to pay taxes on the rebates we received. Never underestimate the ability of tax collectors to screw things up!

I believe there is no telling whether or not the IRS will decide that the EV rebate is taxable and eventually send a tax bill if the rebate was not reported as income.  Having said that, I intend to use your strategy on this issue and treat my rebate as untaxable. If it is deemed taxable, I may have to pay a penalty, but that's a chance I'm willing to take. 

[AmyC]

If you are sure, you erroneously received the 1099-MISC: then adding the 1099-MISC income and then subtracting it back out is the best method. As for the words, write whatever you want for the description. It needs to be simple and clear like-EV dealer rebate.

@hoffadg