Investing in renewable energy can provide several tax advantages. Here are some key tax incentives and credits available for renewable energy investments:
Investment Tax Credit (ITC): The ITC is a dollar-for-dollar credit for expenses invested in renewable energy properties, most often solar developments . The ITC allows taxpayers to deduct a percentage of the cost of renewable energy systems from their federal taxes This credit is available to taxable businesses entities and certain tax-exempt entities eligible for direct payment of tax credits .
Production Tax Credit (PTC): The PTC is another tax credit available for renewable energy projects. It reduces the federal income taxes of qualified tax-paying owners of renewable energy projects based on the electrical output of grid-connected renewable energy facilities .
Clean Energy ITC / Clean Energy PTC: The Clean Energy ITC and Clean Energy PTC are specific tax credits available for clean energy projects. These credits aim to accelerate the deployment of clean energy, clean vehicles, clean buildings, and clean manufacturing .
Environmental Justice ITC Adder: The Inflation Reduction Act includes an Environmental Justice ITC Adder, which offers bonus credits to projects located in low-income communities or energy communities.
Residential Clean Energy Credit: Homeowners who invest in renewable energy for their homes, such as solar, wind, geothermal, fuel cells, or battery storage technology, may qualify for an annual residential clean energy tax credit. The credit equals a percentage of the costs of new, qualified clean energy property installed in the home .
Tax Credits for Energy Efficiency Improvements: Investing in energy-efficient improvements for homes and appliances can also provide tax credits. These improvements include upgraded windows, doors, insulation, and energy-saving heating and cooling equipment .