I received a 1099 from my solar installer....Is it taxable?

[ualdriver]

I'm helping a buddy of mine with his tax return on TurboTax.

He installed a rooftop solar system in 2023.  The State of Illinois offers an incentive called "Illinois Shines" where based on the size of they system, the State of Illinois gives money to the solar installer.  The solar installer then decides whether or not to pass that incentive to the homeowner, but from I understand most installers pass along 100% of the incentive to their homeowners.

Anyway, the solar installer mailed my buddy a 1099 for around $14,000, which is his share of the "Illinois Shines" incentive.  After having spend quite a bit of time reading about this, I'm almost certain this $14,000 is taxable income to the homeowner, even though it's a incentive (I'm thinking it's like a rebate?), but before we enter it as taxable income, just wanted to get the forum's opinion if somehow this isn't a taxable event.

Thanks!

[DawnC · Accepted solution]

If your buddy took the solar tax credit, then it is a taxable recovery.   A recovery is a return of an amount you deducted or took a credit for in an earlier year. The most common recoveries are refunds, reimbursements, and rebates of itemized deductions.  You may also have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit (solar credit).

See Recoveries -   You must include a recovery in your income in the year you receive it, up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year.

[ualdriver]

@DawnC 

Thanks for your time.

I understand your point about a recovery having to be included in income up to the amount of a tax credit that you take.

What is the interaction between an incentive amount that a State (like Illinois) gives him and Federal tax credits that he takes for this solar system?  Does Uncle Sugar expect him to pay Federal tax on a Illinois state incentive (for a solar system in this case) if he takes the Federal Solar Tax Credit?

Thanks!

[DawnC]

Yep - the IRS considers all income taxable unless specifically labeled nontaxable somewhere in the tax code.  In most cases, an amount included in your income is taxable unless it is specifically exempted by law. Income that is taxable must be reported on your return and is subject to tax. Income that is nontaxable may have to be shown on your tax return but isn’t taxable.    See Pub 525

[Yami73]

What do I put in the line labeled schedule C in Box 1?  It is not clear what to enter here.  THank you

[PatriciaV]

Please clarify what you are trying to report. Where are you working in TurboTax? Under what topic? Schedule C is for Profit/Loss from a business.

@Yami73