Frequently Asked Questions
Who is eligible for the Investment Tax Credit (ITC) for Energy Property?
Applies to taxpayers who construct or acquire new energy property including solar, wind, and energy storage technology.
How does the Investment Tax Credit (ITC) for Energy Property work?
Provides a tax credit for a percentage of the basis of qualified energy property (solar, geothermal, fuel cells, energy storage, etc.) placed in service.
What law authorizes the Investment Tax Credit (ITC) for Energy Property?
The Investment Tax Credit (ITC) for Energy Property is authorized under IRC §48 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §48
Source: Internal Revenue Code, Title 26, United States Code
§ 48. Energy credit(a) Energy credit(1) In generalFor purposes of section 46, except as provided in paragraphs (1)(B), (2)(B), and (3)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) Energy percentage(A) In generalExcept as provided in paragraphs (6) and (7), the energy percentage is—(i) 6 percent in the case of—(I) qualified fuel cell property,
(II) energy property described in clause (i) or (iii) of paragraph (3)(A) but only with respect to property the construction of which begins before January 1, 2025,
(III) energy property described in paragraph (3)(A)(ii),
(IV) qualified small wind energy property,
(V) waste energy recovery property,
(VI) energy storage technology,
(VII) qualified biogas property,
(VIII) microgrid controllers, and
(IX) energy property described in clauses (v) and (vii) of paragraph (3)(A), and
(ii) in the case of any energy property to which clause (i) does not apply, 0 percent.
(B) Coordination with rehabilitation creditThe energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(C) Nonapplication of increases to energy percentageFor purposes of energy property described in subparagraph (A)(ii), the energy percentage applicable to such property pursuant to such subparagraph shall not be increased or otherwise adjusted by any provision of this section.
(3) Energy propertyFor purposes of this subpart, the term “energy property” means any property—(A) which is—(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool,
(ii) equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, or electrochromic glass which uses electricity to change its light transmittance properties in order to heat or cool a structure, but only with respect to property the construction of which begins before January 1, 2025,
(iii) equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage,
(iv) qualified fuel cell property or qualified microturbine property,
(v) combined heat and power system property,
(vi) qualified small wind energy property,
(vii) equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to property the construction of which begins before January 1, 2035,
(viii) waste energy recovery property,
(ix) energy storage technology,
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