Energy Investment Tax Credit (Section 48 ITC)
Internal Revenue Service
30% of project cost
30% off your clean energy install
A federal investment tax credit equal to 30% of the cost of qualifying clean energy property placed in service — covering solar, wind (≤100 kW), geothermal, fuel cells, energy storage (≥5 kWh), biogas, microturbines, and combined heat-and-power systems. Projects with fewer than 1 MW output or that meet prevailing wage and apprenticeship requirements receive the full 30%; others receive the 6% base rate. Bonus adders for energy community siting, domestic content, and low-income community location can stack on top. Tax-exempt entities and governments can receive the credit as a direct cash payment via elective pay (§6417). For-profit taxpayers can sell (transfer) their credit to a third-party buyer for cash.
- Funding type
- Tax Credit
- Level
- Federal
- Amount
- 6% base rate or 30% with prevailing wage/apprenticeship compliance (or projects <1 MW). Bonus adders: +10% energy community, +10% domestic content, +10–20% low-income community. Beginning-of-construction deadline: January 1, 2025 for most property (§48E applies for post-2024 projects).
- Realistic amount
- A 500 kW commercial solar installation costing $1M yields a $300,000 credit with prevailing wage compliance. A 2 MW proj…
- Deadline
- Ongoing — credit claimed on annual tax return (Form 3468). Construction must begin before January 1, 2025 for §48; projects beginning construction after December 31, 2024 use §48E instead.
- Status
- active
- States
- Nationwide
- Payment model
- tax offset
Who qualifies
- Must own (or be treated as owning) qualifying energy property placed in service in the US
- Eligible property: solar PV, solar heating/cooling, geothermal energy equipment, fuel cells (≥0.5 kW, >30% efficiency), small wind turbines (≤100 kW nameplate capacity), microturbines (<2,000 kW, ≥26% efficiency), CHP systems, energy storage (≥5 kWh capacity), biogas property (≥52% methane), waste energy recovery (<50 MW), microgrid controllers (4 kW–20 MW)
- Full 30% rate requires prevailing wage compliance for all construction, alteration, and repair workers for 5 years post-commissioning — OR project output must be <1 MW (AC)
- 6% base rate applies to projects ≥1 MW that do not meet prevailing wage/apprenticeship requirements
- Property must be depreciable (for-profit taxpayers) or used in a qualifying trade or business
- Tax-exempt entities, states, tribes, and rural cooperatives may claim via elective pay (§6417)
- For-profit taxpayers may transfer (sell) the credit to an unrelated third party under §6418
- Bonus adder eligibility: energy community location (+10%), domestic content (≥40% US-manufactured components, +10%), low-income community or Indian lands (+10–20% for certain solar/wind)
What it covers
Eligible expenses
- Equipment purchase price for qualifying energy systems
- Installation labor (included in basis of energy property)
- Engineering and design costs capitalized into the property basis
- Interconnection costs for facilities ≤5 MW
- Grid-scale and behind-the-meter energy storage batteries (≥5 kWh) — standalone credit since IRA 2022
- Fuel cell stacks and balance-of-plant components
Ineligible expenses
- Energy property used outside the United States
- Property with a primary purpose other than energy production (e.g., structural components that incidentally generate power)
- Internal combustion engines burning fossil fuels
- Wind facilities ≥100 kW (those qualify for §45 PTC instead — cannot claim both §48 and §45 on same property)
- Costs reimbursed by non-taxable grants or subsidized financing (basis must be reduced proportionally)
How to apply
-
1
Confirm property eligibility and placed-in-service date
Verify the energy system qualifies under §48 (technology type, capacity thresholds, beginning-of-construction date). Confirm it was placed in service during the tax year. Check whether §48 or §48E applies based on construction start.
~3 hrs
-
2
Determine applicable credit rate
Assess whether prevailing wage and apprenticeship requirements were met throughout construction and will be met for 5 post-commissioning years. If not, confirm whether project qualifies for the <1 MW exception. Identify bonus adder eligibility (energy community, domestic content, low-income).
~5 hrs
-
3
Elect direct pay or plan credit transfer (if applicable)
Tax-exempt entities file an elective pay election with the IRS before the return due date. For-profit transferors register with the IRS Transfer Portal and execute a transfer agreement with a third-party buyer before the return is filed.
~8 hrs
-
4
Prepare Form 3468 and supporting documentation
Complete IRS Form 3468 (Investment Credit) with basis of each energy property, credit rate applied, and bonus adder calculations. Assemble prevailing wage documentation, payroll records, apprenticeship ratios, and domestic content certifications if claiming adders.
~10 hrs
-
5
File with tax return and address basis reduction
Attach Form 3468 to your federal income tax return. Reduce the tax basis of the energy property by the full credit amount — this affects your depreciation deductions. If also claiming bonus depreciation (MACRS), coordinate with your CPA for optimal sequencing.
~4 hrs
The 30% rate is not automatic — projects ≥1 MW must meet prevailing wage rules for 5 post-commissioning years or face a 5x credit reduction back to 6%. Budget for ongoing certified payroll documentation.
Deadline & timing
The 'beginning of construction' date governs eligibility for §48 vs §48E. Construction is deemed begun when physical work of significant nature starts OR when 5% of total costs are incurred (safe harbor). Placed-in-service can be years later. Geothermal heat pumps have an extended deadline of January 1, 2035.
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Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.