Solar company offered rebate deal

[caellis3]

Hi! I installed solar panels on my house in 2024. The company I installed them with has a rigid contract that states that I am not eligible for any tax credits and that those credits are for the company solely. So, I did not claim any solar tax credit on my 2024 taxes. However, the company offered an incentive for new customers to sign a 25-year contract for the solar panels. The incentive was that the first year was free. I had originally thought this meant that I would go one year with no payments, however they instead sent me a check for 12 months worth of payments ($2,300) to make this first year “free”. Fast forward to now, I receive a 1099-misc form with the $2,300 in box 3 for income. Is this considered taxable? I thought it was meant as a discount. What do I do?

[Vanessa A]

No, this is not considered taxable income as it would be considered a rebate. However, since they did issue you a 1099-Misc, the IRS will be looking for it, so you will need to enter the income from the form and then  back the income out.  

To enter the 1099 Misc as a rebate take the following steps:

• Income
• 1099-MIsc under Other Common Income
• Enter the information from the 1099-MIsc
• Continue through and say the work does NOT involve work that is like your main job
• Select the years you received it
• Say no, to did this involve an intent to earn money

Then you will take the following steps to remove the income:

• Income
• Less Common Income
• Miscellaneous Income
• Other Reportable Income
• Answer Yes to Any Other Taxable Income
• Enter the description such as 1099-Misc received for rebate for solar panels
• Enter the amount on the 1099-Misc as a negative number. 

If your contract is for a lease, then they are correct, you cannot claim the energy credit, they do.  In order to claim the credit, you would have had to purchase the solar panels.

[Hal_Al · Accepted solution]

If you received an erroneous 1099-Misc, you have several choices:

1. Ideally, you get a corrected 1099-misc from the payer
2. Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the old IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.
3. (Same as VanessaA's reply) Report the income as misc line 8z, Schedule 1 income  (enter in TurboTax at the 1099-MISC screen). For year received, select only 2024, even if you got it or will get it in other years.  Then enter a line 8z deduction, for the same amount.  In TurboTax (TT), enter at:
   - Federal Taxes tab
    - Wages & Income
   Scroll down to:
   -Less Common Income
         -Misc Income, 1099-A, 1099-C
          - On the next screen, choose – Other reportable income -  Answer yes to Any other Taxable Income -On the next screen, Enter the number with a minus sign (-) in front.  Briefly explain at description. Call it something like "erroneous 1099 received"
4. Do nothing and hope you can explain it away when & if the IRS contacts you