U.S. Department of Energy Energy Efficiency and Renewable Energy

Federal Tax Issues Related to Energy Efficiency and Renewable Energy Projects

Financing programs that provide funds to individuals or organizations for the purchase of renewable energy property or energy efficiency property may qualify for a variety of federal or state tax incentives or benefits.

The benefits can take the form of federal production credits, federal investment tax credits, or grants in lieu of tax credits. Those incentives are distinct from the direct subsidies or rebates often provided by utilities, states, or local entities for renewable energy or energy efficiency efforts. In some cases, both energy efficiency and renewable energy projects may also qualify for tax-favored financing, such as tax credit bonds, direct subsidy bonds, or tax-exempt bond financing.

The types of benefits available depend on several factors, including the identity of the eventual owner of the equipment (e.g., homeowner, corporate entity, or public body), the type of technology being installed, and the timing of the project development or equipment installation. 

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