PowerGreen Capital

Meet the New IRA Tax Incentives

ITC for Renewable Energy

If you are considering a solar project with battery storage, but are concerned about the upfront cost,  the new ITC delivers game-changing benefits.

Section 179D for Energy Efficiency

Revised provisions of the the Section 179D tax deduction are great  news if you thought you couldn't afford that HVAC or building envelope upgrade

How the Inflation Reduction Act benefits commercial building owners

The Inflation Reduction Act (IRA) of 2022 has brought some major changes to the federal tax incentives for renewable energy and energy efficiency projects, especially for commercial building owners. The IRA has extended and enhanced two key tax incentives: the Investment Tax Credit (ITC) for renewable energy projects and the Section 179D tax deduction for energy efficiency projects. These provisions can help commercial building owners lower their energy costs, increase their property value, and contribute to a cleaner and more sustainable energy future.

The Revised ITC

The ITC is a tax credit that allows taxpayers to reduce their income tax liability by a percentage of the cost of qualified renewable energy property placed in service during the taxable year. The ITC applies to various types of renewable energy property, such as solar panels, wind turbines, geothermal heat pumps, fuel cells, and small hydropower systems.

Before the IRA, the ITC was scheduled to phase out gradually from 26% in 2020 to 10% in 2022 for most types of renewable energy property. The IRA has changed this by extending the 30% ITC rate for the next 10 years. These changes can provide more certainty and incentive for commercial building owners to invest in renewable energy projects.

Learn more about the Investment Tax Credit

The Revised 179D Deduction

Section 179D is a tax deduction that allows taxpayers to immediately deduct the cost of energy-efficient property installed on or in a commercial building in the U.S. The deduction applies to three categories of property: lighting systems, heating, ventilation, and air conditioning (HVAC) systems, and building envelope components. The property must meet certain energy-saving criteria based on industry standards.

Before the IRA, Section 179D was limited to $1.80 per square foot of building space. The IRA has changed this by increasing the deduction amount to up to $5 per square foot, extending it for 10 years until December 31, 2031, and simplifying it for smaller projects by allowing prescriptive methods instead of performance-based methods to determine if their property meets the energy-saving criteria.

The new provisions in Section 179D can benefit commercial building owners by helping them save money on their energy bills, improve their environmental performance, enhance their comfort and safety, and increase their property value.

Learn more about Section 179D

The new provisions in the ITC and Section 179D also make it more attractive for commercial building owners to combine renewable energy and energy efficiency projects on their buildings, as they can claim both the ITC and Section 179D for eligible property. And you can fund your projects with no upfront costs with C-PACE financing from PowerGreen Capital. Learn more.