Taxes being collected on water rebates
By Kurtis Ming, CBS-13
Jumping at the state’s water rebate program, Alvin Somers ripped out his lawn, and put in drought resistant plants and woodchips. California’s Save our Water program rewarded him with a check for $1,300.
“The idea was terrific,” Somers said.
The state offered rebates of up to $2,000 to put in drought resistant landscaping. Several cities, including Sacramento and Los Angeles have similar programs.
But many who participated in the State’s program are getting surprised with a letter stating they may owe federal taxes on it. If your rebate was $600 or more, the letter reads, “We have been instructed by the Internal Revenue Services (IRS) that in order to comply with federal tax rules, you must… file a 1040 form registering your rebate for federal tax purposes.”
Wait’ll they start making you pay for those obamacare susidies.
Normally, when someone pays you to do something, you can deduct (if you itemize deductions on your tax returns) the costs incurred in doing the work (at least up to the amount you earned – and maybe all of the costs in some cases) – I don’t see why this would be any different. So, and I’m assuming most people spent (not including the value of their time) more money on the drought project than they got back as a rebate, you should be able to report the income, and then deduct the costs, and voila’, the deduction wipes out the extra income and you owe no extra tax due to the rebate; or maybe get the same result by writing off the expenses of doing the work as a charitable donation to the state. The IRS might not like it, but it is unlikely that they will audit you and be able to complain about it. Talk to your tax preparer/expert (which I’m not) and see what they have to say about it. There’s more than one way to skin a cat!
Are the STPUD turf removal payments also taxable ?