There are two tax credits available for businesses and other entities like nonprofits and local and tribal governments that purchase solar energy systems. Generally, project owners cannot claim both the ITC and the PTC for the same property:
- The investment tax credit (ITC) is a tax credit that reduces the federal income tax liability for a percentage of the cost of a solar system that is installed during the tax year.
- The production tax credit (PTC) is a per kilowatt-hour (kWh) tax credit for electricity generated by solar and other qualifying technologies for the first 10 years of a system’s operation. It reduces the federal income tax liability and is adjusted annually for inflation.
Solar systems that are placed in service in 2022 or later and begin construction before 2033 are eligible for a 30% ITC or a 2.75 ¢/kWh PTC if they meet labor requirements issued by the Treasury Department or are under 1 megawatt (MW) in size.