Investment Tax Credits (ITC) have been around since 1962. ITCs were created by Congress to help stimulate the economy and to protect domestic businesses from foreign competition. The types of renewable energy property available for the ITC are, but not limited to, solar, geothermal, fuel cell, microturbine, small wind, waste energy, and biogas. A more detailed listing of energy property and the credit calculation can be found in Internal Revenue Code (IRC) §48 – Energy Credits.
The most talked about and most popular renewable energy property right now is solar. Qualifying “solar” energy property is defined as equipment which uses solar energy to generate electricity, heat or cool a structure, provide solar process heat, or to illuminate the inside of a structure.
For the solar energy property to qualify for the investment tax credit, it must meet three other requirements.
What are some of the tax benefits of solar projects?
Investment Tax Credit:
Depreciation:
As with other things in life, especially from Congress and the IRS, some things are too good to be true. I do want to be clear. The investment tax credits a taxpayer can receive from solar and the additional depreciation are great tax benefits. But there are other ancillary Internal Revenue Codes that can reduce or delay when the benefits are received by the taxpayer.
Part 2 of this blog will focus on the Revenue Codes that taxpayers need to be aware of when contemplating the installation of a solar project and how those codes can impact the benefits received. I will also outline non-Revenue Code items that taxpayers should keep in the back of their mind as well.
This has been a general overview of the solar investment tax credits for commercial taxpayers. If you would like more details on the solar investment tax credit and its application, please contact a Mahoney tax advisor to help answer your questions. See you in my follow up blog.
By Brent Buchman
Associate Director – Tax
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