New York, April 25th As tax season rolls around, many dread the complex paperwork and looming deadlines. However, there’s a silver lining for property owners and designers making energy efficiency upgrades. The federal government offers several tax incentives aimed at supporting decarbonization and combating climate change within the built environment.

The Inflation Reduction Act (IRA) of 2022

Dubbed the most significant climate action ever taken by Congress, the IRA allocates over $300 million towards clean energy and climate mitigation initiatives. This funding has introduced numerous tax credits accessible to both commercial and residential property owners nationwide.

Investment Tax Credit (ITC) for Energy Property

Available until the end of 2024, this tax credit benefits owners who implement energy property, like geothermal heat pumps. Geothermal projects exceeding 1 megawatt (MW) can secure a 6% tax credit, potentially increasing to 30% if they meet certain wage and apprenticeship criteria. Smaller projects under 1 MW automatically qualify for the 30% tax credit, with the possibility of reaching a 70% credit when all additional requirements are satisfied. From 2025, the ITC will transition to the Clean Electricity Investment Tax Credit.

Bonus Credits for Sustainable Practices

1. Domestic Content: This bonus rewards projects incorporating over 40% domestically manufactured materials. Larger projects can earn a 2-10% credit, while smaller ones could receive up to 10%.
2. Energy Communities: Projects developed in brownfield sites or areas impacted by high fossil fuel employment/unemployment can obtain up to a 10% additional credit.
3. Low-Income Communities: Small-scale solar and wind initiatives in low-income areas are eligible for up to a 20% bonus credit.

Additional Incentives

• Clean Electricity Investment Tax Credit (2025-2032): This replaces the previous ITC for properties investing in zero-emission energy production, with similar benefits and bonus opportunities.
• Alternative Fuel Vehicle Refueling Property Credit (2023-2032): Applies to new installations of EV charging stations and other alternative fuel refueling equipment, with credits up to $100,000 per item.
• Energy Efficient Homes Tax Credit (2023-2032): Contractors building new, qualified energy-efficient residences can receive up to $5,000 per property, depending on the certification standards met.
• Energy Efficient Commercial Buildings Deduction: A permanent deduction that significantly benefits commercial property owners investing in energy-efficient installations, with enhanced benefits for projects from 2023 onward.

These incentives not only promote sustainable development but also provide financial relief for those investing in green technology. As we progress, additional federal tax incentives and state or utility rebates are expected to surface, further supporting energy-efficient upgrades.