The homeowner says she bought the insulation with money out of her own pocket — on which she had already paid taxes. To be taxed again, she says, "significantly cuts down on the amount we saved."

I asked Eddleman with the state's comptroller office to explain what happened.

Eddleman says there is an exemption for utilities offering a rebate for energy conservation, and that's why Kuhl's rebate from the utility was untaxed. But there is no exemption, he says, for the state portion.

Marylanders who received a state rebate for under $600 won't receive a 1099. But Eddleman says they should report the income on their tax return.

This is all based on federal law, Eddleman adds. If Maryland legislators don't like it, they can always carve out an exception. They have before.

Several years ago, the state offered solar energy grants to homeowners that also turned out to be taxable, Eddleman says. Responding to complaints, Maryland legislators provided some relief by allowing taxpayers to subtract the rebate from the income reported on their state income tax.

Kuhl has her fingers crossed.

"If everybody complains," she says, "maybe they will look into it."

eileen.ambrose@baltsun.com

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