Section 48 Tax Credit

Section 48 of the Internal Revenue Code provides the Investment Tax Credit (ITC) for commercial, industrial, and utility-scale solar energy systems. It is the commercial counterpart to the residential Section 25D credit and offers a base credit of 30% with potential bonus adders.

Under the Inflation Reduction Act, Section 48 provides a base credit of 6% for commercial solar projects, which increases to 30% if the project meets prevailing wage and apprenticeship requirements (which most commercial projects do). Additional bonus credits are available: +10% for domestic content (using US-manufactured components), +10% for projects in energy communities (areas affected by fossil fuel industry closures), and +10–20% for projects in low-income communities. This means qualifying commercial solar projects can receive total tax credits of 40–60% or more. Section 48 is available for businesses, nonprofits (via direct pay provisions in the IRA), and tax-exempt entities. Unlike the residential credit, commercial systems using Section 48 can also benefit from MACRS depreciation, further improving the financial return. The combined value of the Section 48 ITC and MACRS depreciation can offset 50–70% of the total system cost.