I installed solar panels on my home roof in 2019. I generated Solar Renewable Energy Credits (SRECs) which were sold in energy credits market by a SREC trading company on my behalf. Are those sales taxable, federal or Maryland state? If so, should I be getting some sort of 1099 from my trading company that made the payments to me?
Yes, Solar Renewable Energy Credits are taxable, on both your federal and state returns.
The sales are typically reported on Form 1099-MISC. The form is generally issued to income recipients if at least $600 in income has been received.
However, the income must be reported, even if you don't receive the 1099-MISC.
Following Irene2805's advice from this page, you'll enter this income using the following steps:
Yes, Solar Renewable Energy Credits are taxable, on both your federal and state returns.
The sales are typically reported on Form 1099-MISC. The form is generally issued to income recipients if at least $600 in income has been received.
However, the income must be reported, even if you don't receive the 1099-MISC.
Following Irene2805's advice from this page, you'll enter this income using the following steps:
Thank you so much for clarifying this! A related question I have is: my utility company cuts me a check annually for any excess energy I generated during the preceding 12 months. I assume that will also be considered miscellaneous taxable income?
Yes, it would be considered Miscellaneous Income - you would report this under the "Miscellaneous Income" section and go through the questionnaire step by step to ensure that the system does not "think" this money should be allocated to a Schedule C.
Hi there - bringing this old thread back to life with a new question about SRECs. I received $1,600 in SRECs this year, which I will claim on my taxes (though I have not yet received a 1099 yet from the company that purchased them). However, I also had $1,495 worth of repairs to my system in January (I had to replace my inverter), so my net income after repair costs was only $105.
Can I deduct the repair costs from the income? And if so, how do I do this? Do I just claim $105 as Miscellaneous Inocme somewhere? Or is there a different way to show it?
No, repairs to major components of your home are not tax-deductible. The cost to maintain your solar energy system cannot be used to offset the income you received from Solar Renewable Energy Credits. Please see the post in this discussion from JohnW152 for instructions on how to report your SREC income.
In the 2022 Turbo Tax the field suggested in the solution now says specifically NOT to enter information from 1099-MISC here.
Right, your'e talking about this screen
Here's what you do
1- On the right, in the magnifyig glass type in 1099misc
2- After that, you'll see a link Jump to 1099 misc
3- then this screen will pop up
click yes on the bottom right hand corner. That's where you enter it.
Aren't some repairs to home deductible where a person is taking a dediction for home office deduction. Also, isn't a portion of roof repair deductible as rental expense, where roof is for an up and down unit duplex, where one unit is residence of taxpayer in question? I realize neither of these two situations specifically aligns with the situation involving energy credit sale. However, is there reason to only limit repairs to one's home to these two situations, as partially deductible? Also, what would be considered "major repairs"?
So here's the deal with the home office deduction. If it is deals with cosmetic changes or changing the flooring or painting, then you may simply take it and expense it as it relates to the home office exclusively, not to the actual house itself. . However, if it deals with major repairs like a roof repair which brings your roof to back to a state of suitable for a proper roof, then that would be considered a capital improvement subject to a depreciation life of 27.5 years adjusted for the rental portion. You also have the option of adding it to the cost basis of your home and deperciating it over the remaining life of your home. A third option would be to take a Section 179 depreciation in which case you can fully expense the entire cost of the roof repair.
My solar company doesn't give me a 1099-MISC for my SREC credits, but I can pull the information up on their web site. Do I report the total sales or the net sales, which is total sales minus fees?
You would only report the net sales.
Follow these steps in TurboTax Online:
Are SREC payments taxable income if your solar system hasn't generated a profit yet? In other words, I have spent more money on my solar panels than I have earned back in savings on my electric bill, SREC payments, and the federal tax credit. Should I still declare my SREC payments as income on my federal tax returns?
So these are two different departments. On the solar panels themselves, you may take a tax credit of upto 30% of the cost of the equipment. See HERE Pg 1. Any unused credit can be carried forward indefinitely. See HERE
The SREC income that you received from these panels should be declared seperately on a 1099MISC as per JohnW152 discussed earlier.
I have a follow up question to this answer. According to Carbon Solutions Group, the entity that issues the SREC payments in IL, SREC payments should NOT be considered taxable under the following premise:
"We have been advised by our accountant that there is no need for us to send out 1099’s to our customers.
The reasoning behind this is that REC income is offsetting an investment made in solar, and as long as the overall investment has not become profitable, the REC payment does not impact your income taxes.
If you have begun to profit from your solar system through claiming incentives or any other reason, then you should report it to the IRS and pay taxes on the revenues.
That being said, why would an SREC payment be taxable income if the cost of Solar is significantly more than the SREC payment?
I couldn't find anything in IRS literature addressing the deduction of the purchase or maintenance costs associated with your solar panels. I suspect they are not deductible, as is the case with other home related purchases, repairs and maintenance costs.
Thanks for the reply, my question was not so much about the deduction of the cost of the panels. It was specifically regarding the SREC contractual check that is received as a result of the electricity the panels generate. Should this be considered reportable income?
I have researched this quite a bit and found conflicting answers. It is true IRS does not specifically state anything on this topic. My thought is how can it be income of the check is significantly less than the cost of the panels? According to the entity that provided the check, it should not be considered income so long as the check received does not exceed the cost of the panels...as stated in my original question. Sounds logical to me. Then why are so many "experts" stating it is income even if there was no profit made?
The IRS considers all income to be taxable unless specifically excluded from tax. Assuming they haven't done that here, your only argument would be that you are running a business and the cost of the panels is ordinary and necessary for the business that you are operating. That may be hard to argue as I assume the main purpose of the panels is to generate power for your house, which is not a business activity.
Another issue is the energy credit afforded you by purchasing the panels. The IRS does not normally allow you to deduct the cost of something while at the same time affording you a credit based on the same cost, as that would be considered "double dipping." So to the extent the cost of the panels was used to qualify for an energy credit, you could not also use that cost to reduce the taxability of income generated by the panels.