As we mentioned in our June coverage of the 2009 Recovery Act, homeowners need to use IRS form 5695 to claim the credit. The final form is not yet complete, but you can review the draft version of the 5695, as well as a draft version of the 1040 form. Homeowners or tax preparers should take the total from line 11 of form 5695 and place it on line 52 of form 1040.
In reference to state and local rebates, the IRS has not yet issued guidance. However, the Energy Star site describes how state/local rebates were handled in the past:
If your state/local rebate was taxable (you received 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 received the 30% tax credit on the entire cost, but you had to pay taxes on the local rebate.
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 nontaxable utility rebate, and consumers in tax brackets lower than 30% doing slightly better with a taxable utility rebate. --Nina Patel, senior editor, REMODELING.
