Energy investment tax credits are available for rentals and business property
The IRC §48 Energy Credit, which allows businesses to claim a tax credit for the cost of specified energy property (including solar property), is generally extended an additional year to apply to property for which construction begins before January 1, 2025. Previously the credit was scheduled to sunset for most energy property whose construction began after January 1, 2024.
For energy property placed in service after December 31, 2021, a two-tiered credit system is applied with a “base” credit amount and a “bonus” credit amount. The base credit amount is 6% and the bonus credit amount may equal up to five times the base credit amount. The maximum credit is 30% (6% x 5) of the total cost.
In order to be eligible for the bonus credit rate, taxpayers must meet the wage and apprenticeship requirements for the project. Because the taxpayer claiming the credit is ultimately responsible for the wage and apprenticeship requirements, even of contractors and subcontractors, the taxpayer should make sure that any contracts with contractors and subcontractors require them to meet the wage and apprenticeship requirements set forth in the Internal Revenue Code.
Separately, solar property falls under the five-year property classification under IRC §168 (MACRS) and is bonus depreciation eligible.