SaveBigBread

There are tax implications for those of us that took advantage of energy efficiency rebates or tax credits on the purchase of Energy Star air conditioning, heaters, appliances and other energy efficient home improvement.  The Federal rules apply to State, local, utility and manufacturer rebates.  But, you may find that your state has a different opinion on the tax treatment of Energy Star energy efficiency rebates and tax credits than the guidance provided by the IRS. You should always consult with your tax advisor to get definitive advice on any of this information.

For those of you that need the IRS form in order to claim the $500 Federal Tax Credit for 2011, you can find it on SaveBigBread . Go ahead and register and you’ll find the Federal energy efficiency and renewable tax credit forms [1] in the list of available rebates. Send us an email if you have questions.

If you’ve participated in any state, local, utility, manufacturer rebate or tax credit programs in 2011, you might want to read ahead and share this with your tax credit and rebate advisor.

The answer that the IRS provided to the Department of Energy in a letter dated July 13, 2010 is that the “Internal Revenue Service (IRS) will treat an SEEARP rebate for the purchase of an energy efficient home appliance as a reduction in the purchase price of the appliance rather than income” .

The IRS goes on to write that “If SEP and EECBG grantees (states, local government and regional program sponsors) follow DOE’s guidance, then the IRS will extend this treatment to SEP and EECBG ARRA-funded consumer rebate programs for Energy Star and other qualified energy efficiency appliances” .

Please note, that the IRS does not express an opinion on SEP and EECBG ARRA-funded programs that are “not for Energy Star and other qualified energy efficiency appliances”.

For those of you who want or need the source document to show to your accountant, please go to this link to get the letter from the Department of Energy.

http://www1.eere.energy.gov/wip/pdfs/eecbg_appliance_rebate_guidance_10_015.pdf

I also want to share with you a note that was issued by Sarasota, FL county government around the use of their Energy Star rebates that applies a dollar limit to the Federal tax benefit. The language from Sarasota reads:

“Participants should be aware that the Internal Revenue Service requires reporting of rebates as income if they exceed $600 in one year. Participants will be required to submit a W-9 form with their Rebate Request Form to enable that reporting. Rebates for ENERGY STAR® Appliances are exempt from this requirement and will be subtracted from the annual total rebate amount.”

According to Sarasota County, it appears that if the rebate is in excess of $600, then it does becomes taxable income to the homeowner.

Aother program, the recently created Virginia Home Energy Efficiency Program, set a limit of their rebate at $595. Given the two local government examples, there appears to be something to the $600 limit.

Also keep in mind that a number of states have enacted property tax credit programs that provide credits against property taxes. Again, please check with your tax advisor to understand the difference between federal and/or state income tax requirements.

[1] You’ll also find the rebate forms for any of the utility and local programs that apply to your home.