Received 1099 from power company--OUCH !!

[picachosolar]

I have a 5KW grid tied home system in New Mexico with and 11 cent/kw rebate for 12 years plus net metering--I just got a 1099 from El Paso Electric--don't think I should have to pay Federal Tax on this money---and if so as a power generator how can I offset this with the cost of installing the system--like a business would depreciate the system as an expense against income??? This is a vacation home and use it 3 or 4 months a year so I generate much more KW than I use--humm 30% tax credit and 40% tax---what am I missing ?? My cool solar panel system isn't paying off quite as well as I thought!

[russ]

I have a 5KW grid tied home system in New Mexico with and 11 cent/kw rebate for 12 years plus net metering--I just got a 1099 from El Paso Electric--don't think I should have to pay Federal Tax on this money---and if so as a power generator how can I offset this with the cost of installing the system--like a business would depreciate the system as an expense against income??? This is a vacation home and use it 3 or 4 months a year so I generate much more KW than I use--humm 30% tax credit and 40% tax---what am I missing ?? My cool solar panel system isn't paying off quite as well as I thought!

It is income - therefore taxable unfortunately.

[picachosolar]

I agree that it is income--but the rub is that investing in a product to produce income generally alows that the investment be depreciable--as an energy generator --you are actually a small business in the solar field---I guess I am wondering what others are doing--llike this being one of many "home based businesses" that exist today--

[Mike90250]

I'd check with your tax person, if you got a 1099, then I'd expense the system. It's doing the work, not you. Not wages.

[KRenn]

I have a 5KW grid tied home system in New Mexico with and 11 cent/kw rebate for 12 years plus net metering--I just got a 1099 from El Paso Electric--don't think I should have to pay Federal Tax on this money---and if so as a power generator how can I offset this with the cost of installing the system--like a business would depreciate the system as an expense against income??? This is a vacation home and use it 3 or 4 months a year so I generate much more KW than I use--humm 30% tax credit and 40% tax---what am I missing ?? My cool solar panel system isn't paying off quite as well as I thought!

Generally your utility will 1099 you if you're purchasing a solar system and receiving incentives from them of any sort. Your installer should have covered this ground with you well-ahead of time.

[picachosolar]

Well--in this case- I am the installer and after much searching, I still can't find any discussion of a residential home owners proceedure to offset the 1099 with the expense of installing the system. I sent this question to the IRS help line just to see what their response is. At this point --I am taking the position that I have a home based business and the cost of the system is expensible the first year of operation- per IRS published business guidelines for 2011. I am being 1099'd just for the net moneys being generated each month--not for the total generation. So as it is an expense to El Paso electric, it is income to me and that is reasonable. I do see some discussion that only the full cost, less 1/2 of the Federal Tax credit, can be expensed and it can be in the first year

[KRenn]

Well--in this case- I am the installer and after much searching, I still can't find any discussion of a residential home owners proceedure to offset the 1099 with the expense of installing the system. I sent this question to the IRS help line just to see what their response is. At this point --I am taking the position that I have a home based business and the cost of the system is expensible the first year of operation- per IRS published business guidelines for 2011. I am being 1099'd just for the net moneys being generated each month--not for the total generation. So as it is an expense to El Paso electric, it is income to me and that is reasonable. I do see some discussion that only the full cost, less 1/2 of the Federal Tax credit, can be expensed and it can be in the first year

What you're talking about is depreciation, that does not apply to residential solar systems whatsoever. The IRS has rejected the "small solar business" argument. If you are not a commercial entity or you don't do a set amt of business work from home, you cannot depreciate the system.

[NJSolar]

I agree, you should consult with your accountant in order to get the best answer. Best of Luck

[russ]

I am taking the position that I have a home based business and the cost of the system is expensible the first year of operation- per IRS published business guidelines for 2011.

Wrong and a very good way to end up in the soup! Home businesses are quite likely to be audited - more so than most returns.

Even for a home office you can only claim the percentage of the overall that would apply to the home office - not much

[Naptown]

The answer really depends on who owns the system and property. But certainly a gray area of the tax code. Best guess from a non tax expert is no you cannot claim depreciation.

[KRenn]

The answer really depends on who owns the system and property. But certainly a gray area of the tax code. Best guess from a non tax expert is no you cannot claim depreciation.

Its really not a gray area unless you can "prove" that you are running a legitimate home business and even then you have to divide your power bill into what portion of the bill is utilized for the home and what portion is utilized for the business and you can only depreciate for the portion that falls under the practical use of the business, its a great way to guarantee of being audited, the IRS looks at these claims like a shining red beacon sticking out.


The burden of proof is entirely on the homeowner to justify EXACTLY the amount of power that is going towards the business and have the electric records to verify those claims. Its not easy to do and the accountants I've talked to say "not just no, but hell no" to doing exactly that because it can truly wind up being one giant massive headache.


Definitely this individual should talk to a CPA or a tax person....and if they recommend trying to claim depreciation on some or all of the amount, make sure it is someone who will stand with you when you get audited and not some random Jackson Hewitt blockhead.

[Sunking]

its a great way to guarantee of being audited, the IRS looks at these claims like a shining red beacon sticking out.


The burden of proof is entirely on the homeowner to justify EXACTLY the amount of power that is going towards the business and have the electric records to verify those claims. Its not easy to do and the accountants I've talked to say "not just no, but hell no" to doing exactly that because it can truly wind up being one giant massive headache.

Amen brother I can bear witness to that fact. I get hit about every year.