I received a roughly $100 credit to my electric bill in 2016 (the electric company underwent some kind of merger and was I assume passing on profits to customers), and my question is do I have to report this amount as income on my tax returns?

To me it had seemed like income since the amount was money I was given, rather than it being any sort of refund, and I was going to report it under "Other Income" on Form 1040.

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    Did they actually pay you in cash or was this a discount on future electric bills? – Nosrac Apr 18 '17 at 18:12
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    This was just a discount on future bills. I tracked down the particulars: "Merger of X and Y: X will, promptly upon merger closing, provide $100 million for a Customer Investment Fund across the Y utilities to be used as the public service commissions see fit for customer benefits, such as bill credits, assistance for low-income customers and energy efficiency measures." – Mark Stern Apr 18 '17 at 19:22
  • Are the payments to the utility tax deductible? Same answer. In any case it's your own money coming back. – user207421 Apr 19 '17 at 0:43

In many regions in the United States the state/local governments have a role in setting the rates for their jurisdictions. Frequently they limit the amount of profit the utility can make.

Periodically this leads to the situation where the utility has excess profits. The government/rate commission directs the utility to either cut their rates or refund the excess profits.

If it is a credit off a future bill it isn't taxable at all.

If it is a check it is not taxable for most people. Though for a business or rental property where you are deducting the electric bill as an expense, the refund would be considered "income", and should be reflected in the appropriate section of your taxes by decreasing the total utility expense for the year.

example of "income" for a rental:

  • for 2017 the monthly rate averages $120 for an expected total of $1440 for the year.
  • In October the utility sends you a check for $75.
  • Therefore you can only claim a utility expense of $1365.

if they did it as a credit for your rental property:

  • for 2017 the monthly rate averages $120 for an expected total of $1440 for the year.
  • In October the utility awards you a check for $75.
  • The November is now only $45. ($120-$75)
  • Therefore you can only claim a utility expense of $1365. (120*11 + 45)
  • I can understand limiting rates and such, but limiting the profit itself? That seems kind of odd. – JAB Apr 18 '17 at 20:00
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    The utility wants to set the rate per KWH based on their projected expenses and the projected cost of fuel. Because they have a monopoly (or a near monopoly) the license they have limits their profit. If the cost of fuel drops, or their other expenses are lower then they have excess profit. Of course the utility doesn't agree to a refund or credit until their has been a negotiation. – mhoran_psprep Apr 18 '17 at 20:21
  • I was thinking of something similar to your last paragraph, but in reverse - that if in some situation it is taxable, then you could probably take a corresponding deduction for the utility expense itself, limited to the amount of the credit, similar to the deduction for gambling losses, which can only be claimed up to the amount of any reported gambling winnings. – Dan Henderson Apr 18 '17 at 20:54

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