The investment tax credit (ITC) is a tax credit that reduces the federal income tax liability for a percentage of the cost of a solar system that is installed during the tax year.
Eligibility:
To be eligible for the business ITC or PTC, the solar system must be: Located in the United States or U.S. territories; Use new and limited previously used equipment; Not leased to a tax-exempt entity (e.g., a school), though tax exempt entities are eligible to receive the ITC themselves in the form of a direct payment. The ITC offers additional credits for projects meeting domestic content, energy community, and low-income criteria on top of the credits the project qualifies for based on their labor requirements. Check the program's webpage for more details.
Funding Entity:
IRS
Source:
Federal
Category:
Tax Credit
Eligible Project Type:
New Construction
Rehabilitation
Amount:
Solar systems that are placed in service in 2022 or later and begin construction before 2033 are eligible for a 30% ITC if they meet labor requirements issued by the Treasury Department or are under 1 megawatt (MW) in size. Additional credits are available for projects that meet domestic content minimums (10 percentage point increase in value of the ITC), projects sited in an energy community (10-percentage-point increase in value of the ITC), and projects serving low-income communities (up to an additional 20% ITC depending on eligibility).
Time Available:
Unless Congress decides to renew them, the ITC, PTC, and associated bonuses begin to phase out for projects that commence construction in 2032 or the year the Treasury Secretary determines that there has been a 75% or more reduction in annual greenhouse gas emissions from the production of electricity in the United States as compared to the calendar year 2022 (whichever is later).
Compatibility with other opportunities:
Generally, project owners cannot claim both the ITC and the PTC for the same property, although they could claim different credits for co-located systems, like solar and storage, depending on what further guidance is issued by the IRS.
Purpose of Funds:
Solar
Battery storage
Other
Population Served:
Bonus credits are available to projects site din an energy community, which is one of three things: a brownfield site; an area that, after 2009, had a 0.17% or more direct employment or 25% or more local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas, and has an unemployment rate at or above the national average for the previous year; or a census tract in which a coal mine closed after 1999 (including any adjoining census tract), or a coal-fired electric generating unit has retired after 2009.
Last Updated:
10/09/2023