A rebate received from a utility in a commercial context usually must be reported as taxable income by the recipient. A recipient who must report a rebate as income claims the gross amount paid for solar equipment as his “tax basis” in the equipment for purposes of calculating the commercial solar tax credit or Treasury cash grant.
A rebate received by a homeowner in a residential context usually does not have to be reported as income when the rebate is received from the local utility. A homeowner who does not report the rebate as income takes a “tax basis” in solar equipment equal to the net amount he paid. In other words, if the solar equipment has a gross cost of $20,000, but a rebate from the local utility pays $2,000, then his tax basis in the equipment for purposes of calculating the residential tax credit is $18,000.