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The Inflation Reduction Act (IRA) is the most significant piece of climate and clean energy legislation the United States has ever signed into law. The new law allocates billions of dollars in tax credits and incentives for renewable energy projects, including commercial solar installations.
Utility-scale, commercial, industrial, non-profit, and government solar projects all stand to benefit from the Inflation Reduction Act’s solar panel incentive programs. In this article, we’ll break down the new commercial solar provisions in the Inflation Reduction Act and explain how you can take advantage of them for your commercial solar installation.
Disclaimer: This material has been prepared for informational purposes only. It is subject to change and should not be relied on for tax or financial advice of any kind. You should always consult with your own tax advisors before making purchasing, investment, or tax decisions.
Commercial Solar Tax Credit & Production Tax Credit Under the IRA
Under the Inflation Reduction Act, most commercial solar projects can choose either the solar Investment Tax Credit (ITC) or the Production Tax Credit (PTC). Both credits have potential “adders,” which can be earned by projects that are located in existing energy communities, meet domestic manufacturing requirements, or are installed on qualified low-income properties.
Keep reading to learn more about tax incentives for businesses looking to go solar.
The Inflation Reduction Act Solar Tax Credit in 2023
The Inflation Reduction Act increased and extended the solar Investment Tax Credit for commercial solar panel systems. The Investment Tax Credit (ITC) is a federal tax credit that reduces your tax liability by a percentage of your commercial solar installation costs.
The commercial solar tax credit is worth up to 30% of your total project costs. Important: the earlier schedule (30% through 2032, stepping down in 2033–2034 and ending in 2035) was superseded by the One Big Beautiful Bill Act, which accelerated the commercial phase-out. A project now generally must begin construction by July 4, 2026 or be placed in service by December 31, 2027 to qualify.
In addition to increasing and extending the commercial solar tax credit, the IRA also added some new provisions:
- Standalone solar battery storage is eligible for the tax credit, as of January 1, 2023
- Certain tax-exempt entities are eligible for a direct pay option
- The commercial ITC can be transferred to a third party
The Production Tax Credit in 2023
The Inflation Reduction Act resurrected the Production Tax Credit for commercial solar panels. The commercial solar production tax credit (PTC) allows owners and developers of qualifying commercial solar energy systems to claim a federal tax credit on every kilowatt-hour of electricity their systems produce for 10 years.
The production tax credit for commercial solar is worth 2.6 cents per kilowatt-hour in 2023 and will be adjusted annually based on inflation. The production tax credit for commercial solar was likewise accelerated by the One Big Beautiful Bill Act; like the ITC, solar projects generally must begin construction by July 4, 2026 or be placed in service by December 31, 2027 to qualify (the earlier 2034–2036 phase-down no longer applies).
Like the ITC, the PTC can be transferred to a third party.
How to Claim the Commercial Solar Tax Credit
Commercial solar projects must meet certain criteria to be eligible for tax credits:
- The system must be under 1 megawatt (MW) in size
- The system must be owned or financed by the taxpaying entity (no leases)
- The project must meet the Treasury Department’s labor requirements
- The system must be located in the United States or its territories
- The system must use mostly new equipment
To claim the commercial solar tax credit, the taxpayer must complete and attach IRS Form 3468 to their annual tax return. To claim the production tax credit, the taxpayer must complete and attach IRS Form 8962 to their annual tax return.
Take Advantage of Commercial Solar Tax Incentives
The Inflation Reduction Act incentives make now a great time to install commercial solar panels. Boston Solar is the leading commercial solar company in Massachusetts and we can help you take advantage of all the benefits of solar energy for your business.
Boston Solar has been in business for over 10 years and we’ve installed more than 5,000 solar energy systems. Our portfolio includes the new solar energy system at MGM Music Hall at Fenway, and we are a Proud Partner of the Boston Red Sox. If you’re looking for an experienced, Massachusetts-based commercial solar installer near you, give us a call today!
