SRECs generated from home solar syste

[AbrahamT]

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.

[Edited 03/20/2023  10:06 AM PST]

12:32

I am so happy to hear that!

[MikeyV]

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? 

[ThomasM125]

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.

@MikeyV 

[MikeyV]

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?

[ThomasM125]

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.