The Investment Tax Credit (commonly referred to as “ITC”) offsets federal tax and is generally equivalent to a certain percentage of eligible renewable energy property. The tax credit rate depends on various factors, including the type of property or technology for which the tax credit is being claimed, the applicable construction, employment requirements, and many others. Generally, taxpayers choose between an Investment Tax Credit in Section 48(E), the various types of which are discussed below, or a Production Tax Credit in Section 45, the different types of which are discussed under the Federal Transferable Production Tax Credit Tab.

Energy Tax Credit

The Investment Tax Credit provided by Section 48 is set to expire in 2024 and will be replaced in 2025 with the Clean Electricity Investment Tax Credit, which is discussed directly below. The Inflation Reduction Act extends the date of construction in most cases to 2024. It maintains a ten percent for microturbine projects and a thirty percent tax credit for solar energy property, geothermal property, fiber-optic solar property, fuel cell property, microturbine property, small wind property, offshore wind property, combined heat and power property, waste energy property). This tax credit also contains additional unique provisions like applying a ten percent for domestic manufacturing and for projects located in energy communities and a thirty percent tax credit for geothermal heat pumps constructed before January 1, 2033.

Clean Electricity Investment Tax Credit

This newly established tech-neutral tax credit created under Section 48(E) replaces the traditional Investment Tax Credit when it phases out in 2024, an emissions-based incentive neutral and flexible between clean electricity technologies.

Qualifying Advanced Energy Project Credit

Provided for by Section 48(C)extends the 30 percent investment tax credit to clean energy projects that strengthen domestic energy manufacturing and support the production and recycling of clean energy products. The tax credit awards manufacturing facilities that demonstrate substantial emissions reduction. This tax credit can also be awarded for low-carbon heat, carbon capture, and other energy-efficient products.