Incentives
Investment Tax Credit (ITC)
Definition
A federal tax credit allowing businesses to deduct a percentage of the cost of qualified energy property (solar, fuel cells, battery storage, CHP systems, etc.) directly from federal taxes owed. Under the Inflation Reduction Act (2022), the base ITC is 30% for most clean energy technologies through 2032.
Why It Matters for Your Business
The ITC directly reduces federal tax liability — not just taxable income — making it one of the most powerful energy incentives for commercial properties. A $1M solar installation with a 30% ITC generates $300,000 in federal tax credits that offset taxes dollar-for-dollar.
Frequently Asked Questions
What systems qualify for the ITC?
Solar PV, battery energy storage (standalone, post-2023), fuel cells, small wind, geothermal heat pumps, microturbines, and combined heat and power (CHP). See IRS Form 3468 and IRC Section 48.
Can the ITC be combined with bonus depreciation?
Yes. The ITC reduces the depreciable basis of the asset by 50% of the credit amount, but the remaining basis is still eligible for MACRS/bonus depreciation. Both incentives can be stacked.
Are there bonus adders to the base 30% ITC?
Yes. The IRA adds bonus credits for domestic content (10%), projects in energy communities (10%), and low-income community projects (10–20%). Maximum stacked ITC can reach 50–70% in some cases.