How does a project qualify for the 10% ITC domestic content bonus?
Projects using domestically manufactured components can earn an additional 10% Investment Tax Credit bonus, bringing the total credit to 40% of eligible costs.
The federal Inflation Reduction Act introduced a domestic content bonus that adds 10 percentage points to the base ITC rate. For a standard solar project qualifying for the 30% ITC, meeting domestic content requirements brings the total credit to 40% — a significant increase in project economics.
What the Requirement Looks Like
To qualify, your project must meet a threshold for domestically manufactured components. Specifically, at least 40% of the total cost of manufactured products (such as solar panels, inverters, and racking) must be produced in the United States. This threshold applies to the manufactured components themselves, not to labor or soft costs like engineering and permitting.
The 40% threshold is based on cost, not quantity. So if your total manufactured component costs are $500,000, at least $200,000 of those components must be domestically produced.
How to Document Compliance
Documentation is critical. You'll need to maintain records showing the origin of manufactured components, including certifications from suppliers confirming where products were manufactured. The IRS may request this documentation during an audit, so treat it with the same rigor as your ITC cost documentation.
Work with your solar developer during project planning to identify domestic sourcing options and ensure proper documentation is in place before construction begins.
Is It Worth Pursuing?
The additional 10% credit can meaningfully improve project returns, but domestic components may carry a price premium. Run the math on your specific project: if the cost premium for domestic equipment exceeds the value of the bonus credit, it may not make financial sense. Your solar developer or financial advisor can model both scenarios to help you decide.
Important Note
Domestic content requirements and IRS guidance in this area are still evolving. The specific rules around what qualifies as "domestic" manufacturing and how compliance is verified continue to be refined. Consult a tax professional familiar with the latest guidance before committing to a domestic content strategy.