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Do you have to subtract your PA Sunshine Grant before applying for the 30% Federal Tax Credit?

This is a good question and may be best answered by a qualified tax adviser.

Even the IRS provides an unclear answer:

“The IRS has not issued guidance on how these federal tax credits will interact with State or local rebates. However, in the past, it has worked like this:

  • If your state/local rebate was taxable (you got a 1099 tax form and it was considered taxable income), then you did not have to subtract the rebate amount from the total cost of your new energy efficient property. So, you got the 30% tax credit on the entire cost, but you had to pay taxes on the local rebate. Or,
  • If your state/local utility rebate was not taxable, then you did have to subtract the rebate amount from the total cost before you figured out your 30% federal tax credit.

Both options will come close to the same bottom line. With consumers in tax brackets above 30% doing slightly better with a non-taxable utility rebate, and consumers in tax brackets lower than 30% doing slightly better with a taxable utility rebate”

Please see the EnergyStar web site for the complete text.

It is my understanding that the State of Pennsylvania will issue a 1099 for your PA Sunshine Grant; which means the first option listed above will apply.

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