earth energy Solutions GROUP

… revealing and resolving the economics of energy efficiency

Residential Energy Conservation Subsidy Exclusion (Personal)

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Although we focus on the incentives for Corporate America, it is very important that you know what is available for your residence and those of every commercial client we are servicing; they all have residences.  Help businesses help their employees and help your neighbor living in a home or on a boat… eeS GROUP

Last DSIRE Review: 07/16/2010
Program Overview:
State: Federal
Incentive Type: Personal Exemption
Eligible Efficiency Technologies: Yes; specific technologies not identified
Eligible Renewable/Other Technologies: Solar Water Heat, Solar Space Heat, Photovoltaics
Applicable Sectors: Residential, Multi-Family Residential
Amount: 100% of subsidy
Web Site:
Authority 1:
Date Enacted:
Date Effective:
26 USC § 136
10/24/1992 (subsequently amended)
According to Section 136 of the U.S. Code, energy conservation subsidies provided to customers by public utilities,* either directly or indirectly, 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. 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 solar-electric 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. This publication states: “If you are a customer of an electric utility company and you participate in the utility’s energy conservation program, you may receive on your monthly electric bill either: a reduction in the purchase price of electricity furnished to you (rate reduction), or a nonrefundable credit against the purchase price of the electricity. The amount of the rate reduction or nonrefundable credit is not included in your income.”

* 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.


Public Information – IRS
U.S. Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
Phone: (800) 829-1040
Web Site:

Author: CSea

... embracing what I can change and accepting what I cannot, while totally grateful for everything about my life.

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