What is the federal tax treatment of state government incentives/rebates assigned directly to the manufacturer by the homeowner/solar system purchaser?

[steinar57]

I live in New York.  This year I purchased solar panels for my main home from Solar City.  A state government authority, NYSERDA, paid me an 8% rebate on the cost of the system.  As part of my contract with Solar City, I assigned this rebate to Solar City so it was paid directly to them as the final payment for the system.  Do I need to report this 8% as income or not?  And what is the basis for my solar tax credit?  Does it include this 8% or not?

[ToddL · Accepted solution]

Unless the 8% rebate is reported to you on a 1099-MISC or 1099-G, it is not income and you do not need to report it on your tax return. 

The basis of your solar panel installation must be reduced by the 8% rebate, both for any federal energy credit or calculating the basis of your home should you ever sell it or convert it into a rental.