Discussion:Windmills
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Discussion Forum Index --> Advanced Tax Questions --> Windmills
Discussion Forum Index --> Tax Questions --> Windmills
| 29 May 2008 | |
| Client owns a farm. Is planning on putting up a windmill. If they produce more than they use and the electric company pays them for the excess, where does this get reported?
I am making an assumption that the cost of construction will be capitalized and any monies received would be reported as income on the Sch F. Again, these are unedjumacated guesses until such time I actually have to research. Thanks, Fred | |
| 29 May 2008 | |
| Fred:
I've never done one of these but I know the electricity contracts are similar to mineral leases. If Co A leases land from me for a windmill, I get a lease payment and a royalty interest in the electricty generated. I would guestimate that a windmill used to generate local electricty would be a sch f asset. I would look at the possibility that sold electricty would be a schedule E income instead of F. This may, however, cause problems deducting the depreciation on F instead of E. I look at it kind of like an office building that houses your business but also rents to another entity. Part of it is C and part is E. Depending upon the electicity sold, this could be a benefit or a detriment. I would try to bifurcate the income if it is substantial, thus avoiding FICA and Medicare issues. Sorry I don't have a specific cite. Hope that helps. | |
| 29 May 2008 | |
| But then, it may be a working interest which would put it on C (or F) anyway. You may not be able to change the nature of the income since the Rancher/Farmer owns the windmill. | |
| 29 May 2008 | |
| What about sched e? The income is not from farm products. I'd consider it renting several sq ft and receiving income for the rental. | |
| 29 May 2008 | |
| Is the client putting up their own windmill (and paying for the windmill)? Or are they leasing the ground to let somebody put up a windmill (wind turbine is the actual name).
If they're putting up their own wind turbine, then it's Schedule C. If the ground is leased to somebody to put up a wind turbine, then it's Schedule E. Here in Northwest Missouri, we have almost 100 wind turbines installed or in the process, so I get to deal with this alot. | |
| May 30, 2008 | |
| Is this part of a business? If this is taxable, does that mean that someone who equips a home with solar power and feeds electricity back to the power company has taxable income on that also? | |
| 30 May 2008 | |
| It's gross income and without an exclusion or deductions, it's taxable. Any bets on how many people would report it? | |
| 30 May 2008 | |
| There is a credit for electricity sales by windmill owners. The credit is 1.5 cents per kilowatt hour. See Form 8835. | |
| 30 May 2008 | |
| The client left a message about constructing one windmill on their farm to generate electricity for their farm and to sell the excess, if any, back to the utility company. They may receive grant money for some construction costs, but they will be putting up some construction costs themselves.
In my opinion, the purpose of them doing this is to ultimately reduce their costs of the farm. Thanks for all the great input so far. Fred | |
| 31 May 2008 | |
| That sounds like a commendable business plan. I suspect that it will take 10-15 years to break even - unless energy costs continue to skyrocket, in which case his ROI could come a lot sooner. I believe that if more individuals take this calculated risk, we stand a much better chance of becoming energy self-sufficient. | |
