Residential Energy Conservation Subsidy Exclusion (Personal) (Federal)
Last modified on February 12, 2015.
Financial Incentive Program
|Name||Residential Energy Conservation Subsidy Exclusion (Personal)|
|Incentive Type||Personal Exemption|
|Applicable Sector||Residential, Multi-Family Residential|
|Eligible Technologies||Solar Water Heat, Solar Space Heat, Photovoltaics, Yes; specific technologies not identified|
|Energy Category||Renewable Energy Incentive Programs, Energy Efficiency Incentive Programs|
|Amount||100% of subsidy|
|Program Administrator||U.S. Internal Revenue Service|
|References||DSIREDatabase of State Incentives for Renewables and Efficiency|
According to Section 136 of the U.S. Code, energy conservation subsidies provided (directly or indirectly) to customers by public utilities* are non-taxable. This exclusion does not apply to electricity-generating systems registered as "qualifying facilities" under the Public Utility Regulatory Policies Act of 1978 (PURPA). If a taxpayer claims federal tax credits or deductions for the energy conservation property, the investment basis for the purpose of claiming the deduction or tax credit must be reduced by the value of the energy conservation subsidy (i.e., a taxpayer may not claim a tax credit for an expense that the taxpayer ultimately did not pay).
The term "energy conservation measure" includes installations or modifications primarily designed to reduce consumption of electricity or natural gas, or to improve the management of energy demand. Eligible dwelling units include houses, apartments, condominiums, mobile homes, boats and similar properties. If a building or structure contains both dwelling units and other units, any subsidy must be properly allocated.
The definition of "energy conservation measure" implies that utility rebates for residential solar-thermal projects and photovoltaic (PV) systems may be non-taxable. However, the IRS has not ruled definitively on this issue. Taxpayers considering using this provision for a renewable energy system should discuss the details of the project with a tax professional. Other types of utility subsidies that may come in the form of credits or reduced rates might also be non-taxable, according to IRS Publication 525.
* The term "public utility" is defined as an entity "engaged in the sale of electricity or natural gas to residential, commercial, or industrial customers for use by such customers." The term includes federal, state and local government entities.
|Contact Name||Public Information - IRS|
|Department||U.S. Internal Revenue Service|
|Address||1111 Constitution Avenue, N.W.|
|Place||Washington, District of Columbia|
Authorities (Please contact the if there are any file problems.)
|Authority 1:||26 USC § 136|
|Date Enacted||10/24/1992 (subsequently amended)|
- Incentive and policy data are reviewed and approved by the N.C. Solar Center's DSIRE project staff.