Your ITC is claimed through your federal tax return in the calendar year for which the project officially commenced.
What is an ITC?
Investment tax credits are a federal tax incentive for business investment. They let businesses deduct a certain percentage of investment costs from their taxes. These credits are in addition to normal allowances for depreciation. This general business credit can only offset tax liability.
Solar Investment Tax Credit
The Solar Investment Tax Credit is currently a 30 % federal tax credit claimed against the tax liability of commercial investors in solar energy property (under Section 48).
Eligibility
The amount of the solar tax credit equals a percentage of the cost of eligible property—called solar energy property—placed in service during the year. This percentage varies according to the year construction began:
| Tax year | '22 | '23 | '24 | '25 | '26 | '27 | '28 | '29 | '30 | '31 | '32 | '33 | '34 | '35 |
|
Credit prior to IRA |
26% | 22% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% |
| Credit Under IRA |
30% |
30% | 30% | 30% | 30% | 30% | 30% | 30% | 30% | 30% | 30% | 26% | 22% | 0% |
The IRS considers construction begun when “physical work of a significant nature" starts. This test looks at all the facts and circumstances surrounding the construction of the property. Alternatively, the IRS deems the requirement met after your company incurs at least 5% of the final project costs.
How to Claim the Solar Tax Credit
To claim the ITC, a taxpayer must complete and attach IRS Form 3468 to their tax return. Instructions for completing the form are available at IRS.gov
U.S. Department of Energy - Guide to the Federal Investment Tax Credit for Commercial Photovoltaics*
*This guide does not include IRA updates, but this is still a generally helpful outline.