1099 G for newly acquired rental asset - how to report

[ldh312]

I bought a new heat pump for a rental apartment.  The cost was $5400, but I got a rebate of $800 from the local utility that was reported to me on a 1099G.

I would like to reduce the cost of the asset by $800 and not report the $800 as income since the heat pump is a 27.5 year asset and I don't qualify for the small taxpayer safe harbor.  But I am worried that this not correct.

Suggestions?

[PatriciaV]

What box reports the rebate on Form 1099-G?

[ldh312]

1099 G shows the $800 in box 6, taxable grants

[MaxA1]

The correct thing to do is depreciate $4,600 ($5,400-$800) of your heat pump.  If you don't report your 1099G, this may create a matching issue with the IRS and you may get an IRS notice about it.

[Edited 03/01/26 | 10:124 am PST]

[ldh312]

This does not seem correct to me.  If I claim the additional $800 as income, it seems to me that I should depreciate the full $5417.  

I guess I just don't understand.

[PatriciaV · Accepted solution]

According to the IRS, a rebate related to the purchase of energy efficient appliances is not included in the purchaser's gross taxable income (see IRS Announcement 2024-19, under Rebates Excluded from Purchasers’ Gross Income.)

Further, under "Required Adjustments to Purchasers’ Basis in Property," the rebate is not included in the purchaser's cost basis. The example given shows that the amount of the rebate is deducted from the asset's original basis.

@ldh312 

[ldh312]

Thank you.  That is the result that made sense to me and I appreciate the citations.