Section 48
Geothermal heat pumps
Ground-source heating and cooling for commercial buildings qualifies when construction begins before January 1, 2035. The base rate steps down for projects starting in 2033 and 2034.
IRC §48 and §48E · Energy investment tax credit
The energy investment tax credit, documented by engineers
The ITC is a federal credit of 6 to 30 percent of the cost of qualifying energy property, and bonus rates can add more. aecre's ITC basis studies separate the qualifying equipment from the rest of the project and document every rate you claim, so the credit holds up and your CPA can file with confidence.
Eligibility
What qualifies for the ITC after the 2025 tax law?
Geothermal heat pumps, energy storage, fuel cells and other zero-emission generation remain eligible, combined heat and power qualifies when construction began before 2025, and wind and solar now face a placed-in-service deadline. The rules turn on the technology and on when construction began.
Section 48E
Energy storage
Battery storage and thermal energy storage tied to a building's HVAC system qualify, including storage placed in service at a solar site. The 2027 wind and solar deadline does not apply to storage.
Section 48 and 48E
Combined heat and power and fuel cells
CHP that began construction before January 1, 2025 can still qualify when placed in service if it exceeds 60 percent efficiency. Fuel-cell systems, including fuel-cell CHP, qualify at a flat 30 percent when construction begins after 2025.
Section 48E
Solar and wind
Rooftop and on-site solar can still qualify if placed in service by December 31, 2027. Projects that began construction by July 4, 2026 keep the longer schedule.
Section 48E
Other zero-emission generation
Geothermal electric, hydropower, nuclear and similar facilities with a greenhouse gas emissions rate of zero or less qualify, with the credit phasing down in later years.
For projects starting after 2025
Foreign entity rules
Section 48E facilities and storage whose construction begins after December 31, 2025 cannot include material assistance from a prohibited foreign entity, so supply chain records now matter as much as costs.
Rates and deadlines from the Internal Revenue Code as amended July 4, 2025. Your CPA confirms the final position for each project.
The study
What is an ITC basis study?
An engineering-based cost segregation study aimed at the credit. It separates the cost of eligible energy property from the building, its structural components and other nonqualifying costs, so the credit is claimed on the right number and can be supported on exam.
What the study delivers
- Eligible basis, component by component. Equipment and integral property tied to drawings, contracts and cost records, with the qualifying soft costs included.
- Interconnection costs. Included where the law allows, for projects of 5 megawatts or less.
- Rate support. Documentation for the base rate and each bonus rate you claim.
- Credit computation. The credit and the depreciable basis that remains, ready for your CPA.
- Substantiation file. Retained for exam, and for buyer due diligence when a credit is sold.
Rates
How do the ITC bonus rates work?
Meeting prevailing wage and apprenticeship requirements multiplies the 6 percent base rate by five, to 30 percent. Domestic content and energy community status each add up to 10 more points. Each one is a documentation exercise, and each one can be lost without the records.
Up to 30%
Prevailing wage and apprenticeship
Laborers and mechanics paid at Department of Labor prevailing rates during construction and for five years of repairs, with required apprentice hours. Projects under 1 megawatt get the 30 percent rate without these tests.
Up to 10 points
Domestic content
Steel and iron made in the United States, plus a share of manufactured products that rises with the construction start year: 50 percent for 2026 and 55 percent after.
Up to 10 points
Energy communities
Projects placed in service in qualifying brownfield, statistical area or coal closure locations, based on data the IRS updates each year.
Same building
How does the ITC work with cost segregation and 179D?
The ITC reduces the energy property's depreciable basis by half of the credit, and the rest of the building can still be studied for cost segregation. Lighting, HVAC and envelope work may also qualify for 179D. We plan all three together so each incentive is applied to the right property and nothing is counted twice.
Utility scale
Does aecre work on utility-scale projects?
Yes. The same basis study method scales from a single building to utility and large industrial projects, including utility-scale storage and generation under section 48E.
Large projects bring more agreements to review, including EPC contracts, interconnection agreements and equipment supply terms, and more cost to classify. The work is the same: tie every dollar to the property it buys, apply the right rules to it, and keep the records that support the claim, a direct payment election or a credit sale.
Owners who are tax-exempt or governmental can elect direct payment, and taxable owners can sell eligible credits. For direct payment on projects of 1 MW or more that began construction after 2023, the full amount requires domestic content or a documented exception. In both cases the basis study and documentation support the amount, and your CPA and advisors handle the election or the sale.
Process
How does an ITC engagement work?
Four stages, starting as early as possible. The records that support the bonus rates are easiest to keep while the project is being built.
Pre-construction review
What to document and when: start of construction, wages and apprentice hours, domestic content and supplier records.
Cost and document review
Drawings, contracts, invoices and cost reports gathered and reconciled to the project total.
Basis study and computation
Eligible property classified component by component, rates documented and the credit computed.
Ready for your CPA
The report, computation and substantiation file, for the return, an election or a buyer's diligence.
Questions
ITC questions
Short answers. Every project turns on its own facts, so a 30-minute call is the fastest way to a real answer.
What is the energy investment tax credit?
The energy investment tax credit (ITC) is a federal credit equal to a percentage of the cost of qualifying energy property, claimed in the year the property is placed in service. Sections 48 and 48E of the Internal Revenue Code set a base rate of 6 percent, or 30 percent for projects that meet prevailing wage and apprenticeship requirements or are under 1 megawatt, and bonus rates can add points for domestic content and energy communities.
What qualifies for the ITC after the 2025 tax law?
Geothermal heat pumps qualify under section 48 when construction begins before January 1, 2035. Energy storage, including storage at solar sites, and other zero-emission generation qualify under section 48E. Fuel cell property, including fuel-cell combined heat and power, qualifies under section 48E at a flat 30 percent when construction begins after December 31, 2025. Wind and solar qualify under section 48E only if placed in service by December 31, 2027, unless construction began by July 4, 2026.
Does combined heat and power still qualify for the ITC?
Combined heat and power that began construction before January 1, 2025 can still qualify under section 48 when it is placed in service, if it exceeds 60 percent efficiency and meets the thermal and electrical output tests; the credit is scaled down above 15 megawatts and systems over 50 megawatts are excluded. Engine and turbine systems that begin construction later fall outside section 48. Fuel-cell systems that begin construction after 2025 qualify under section 48E at a flat 30 percent.
What is an ITC basis study?
An ITC basis study separates the cost of credit-eligible energy property from the building, its structural components and other nonqualifying costs, includes the soft costs that belong in basis, and documents the result so the credit can be supported on exam. It is an engineering-based cost segregation study aimed at the credit rather than at depreciation alone.
How does the ITC interact with depreciation?
Claiming the ITC reduces the property's depreciable basis by half of the credit. The remaining basis is still depreciated, and the rest of the building can be studied for cost segregation, so the two are planned together.
Can a tax-exempt or government owner benefit from the ITC?
Yes. Tax-exempt organizations, governments and certain other entities can elect to receive the credit as a direct payment, and taxable owners can sell eligible credits to an unrelated buyer. For projects of 1 MW or more that began construction after 2023, the full direct payment requires domestic content or a documented exception. In both cases the basis study and documentation are what support the amount; your CPA and advisors handle the election or the sale.
Talk through your project
30 minutes with both partners. We look at the technology, the construction timeline and the records you have, and tell you what an ITC study would cover, before you commit to anything. We respond within one business day.
Taylor BeamerPartner, Operations and Engineering[email protected]832-217-4469
Brandon CarrollPartner, Growth and Strategy[email protected]857-997-4141