1099 Misc for CO Xcel Energy Electric Vehicle Purchase/Lease Rebate

[childclan]

I received a 1099 Misc for this EV Rebate for income qualified individuals.  It was for the EV itself, NOT for the Home Wiring rebate.  I received it after the purchase of the vehicle in the form of a check, NOT as a tax incentive  or as a reduction in the purchase price at the time of sale.  It is my understanding that because it is a REBATE, not a tax incentive, that it should not be taxable.  However, when I enter it in Turbo Tax it is clearly being taxed, as it is reducing both my state and federal returns substantially.  This is despite the fact that I answered the related questions as follows for the 1099 misc in the "Other Common Income" section (note that I do have a business as part of this return for my husband, but I am NOT entering this in the business section and I have attached the 1099 misc to me):

1) Any of the uncommon situations apply? No (I tried saying it was a manufacturers incentive payment and it still taxed it)

2) Did it involve work like your main job? No.

3) How often did you receive it?  Only in the 2024 tax year.

4) Did you intend to earn money? No.

Is there a different way of entering this so that it doesn't end up getting taxed?

[DianeW777]

It depends. If it is simply a cash rebate for the purchase of your vehicle it is not required to be reported. However, if your dealer did provide information to the IRS about your electric vehicle (EV).  If your seller did not do the following you should assume the rebate is not taxable.

• Sellers of vehicles that are eligible for a new clean vehicle credit under IRC 30D must furnish a report to the buyer at the time of sale and also to the IRS for those vehicles to be eligible for a credit under IRC 30D. This includes manufacturers who sell directly to customers. IRS Publication 5864

Cash rebates. IRS Publication 525

A cash rebate you receive from a dealer or manufacturer of an item you buy isn't income, but you must reduce your cost basis by the amount of the rebate.

Example 36.

You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. The $2,000 isn't income to you. Your basis in the car is $22,000. This is the basis on which you figure gain or loss if you sell the car, and figure depreciation if you use it for business.

If the cash rebate applies to you remove the 1099-MISC from your tax return use the link below for your TurboTax version.

• If you're using TurboTax Online software and need to delete a form, click here.
• If you're using TurboTax Desktop software and need to delete a form, click here.

[childclan]

Thank you for taking the time to reply @DianeW777 , as well as providing the links.  I have a couple of follow up questions, but first some additional information.  So I believe the EV purchase was reported to the IRS, as we filed Form 8936 (Clean Vehicle Credits) with our Federal Return.  However, in the rebate application from Xcel, they explicitly said:

XCEL ENERGY CUSTOMERS RECEIVING AN EV REBATE ACKNOWLEDGE
AND AGREE THAT THE EV REBATE IS BEING PROVIDED IN LIEU OF
ANY STATE OF COLORADO TAX CREDIT APPLICABLE TO CUSTOMER’S
PURCHASE OF AN EV. BY ACCEPTING THE EV REBATE YOU SHALL
NOT CLAIM AND AGREE TO FORFEIT YOUR RIGHT TO ANY SUCH TAX
REBATE FROM THE STATE OF COLORADO.

Based on that, in our Colorado return, we did NOT claim the Innovative Motor Vehicle Credit.  I will also note that later in the application it said:

The applicant is responsible for all tax liability imposed as a result of the EV Rebate, if any. Xcel Energy is not responsible for any taxes imposed on the applicant as a result of the EV Rebate, if any.

So my follow up questions are in regards to the 1099-Misc we received.  

1) Based on the above, it seems like they provide the 1099 as information and you determine if it is taxable (for instance, if the vehicle was used in a business).  Since the vehicle is only used for personal use in our case, and it seems to meet the definition of a cash rebate in the info you provided, we are leaning toward it does NOT need to be counted as income.  Does that make sense?

2) If you agree, then my question is if we should actually remove the 1099-MISC (using the instructions you provided).  Is it actually allowed to not report a 1099-MISC?  We saw some other posts that we should enter the 1099-MISC, but then later on the Schedule 1 / Other Income Statement (where the 5500 rebate is showing up on line z2b), add an entry on line z12 with a -5500 to offset the rebate to 0.  Do you have an opinion of which way is more appropriate to report this?