Rebates received from a utility in a commercial context, must be reported as taxable income by the recipient. Any recipient who reports a rebate as income, claims the gross amount paid for solar equipment as his “tax basis”, for the purpose of calculating the commercial solar tax credit or Treasury cash grant.

A rebate that is received by a homeowner in a residential context, generally does not have to be reported as income once the rebate is received from the local utility. If a homeowner does not report the rebate as income, they take a “tax basis” in solar equipment equal to the net amount he paid. In other words, if the total cost of the solar equipment has a gross of $20,000, but a rebate from the local utility pays $2,000, then his tax basis in the equipment is $18,000 (for the purpose of calculating the residential tax credit).