Tax Incentives

Federal Tax Credits

1. Residential Clean Energy Credit (Section 48)

Overview: This federal tax credit incentivizes homeowners to install renewable energy systems, such as solar panels, wind turbines, geothermal heat pumps, and battery storage.
Incentive Amount: Homeowners can claim 30% of the installation cost of qualifying energy systems, with specific caps depending on the technology. For instance, fuel cell systems are capped at $500 per half kilowatt of capacity.
Eligibility: Available to both single-family and multifamily properties across the U.S.
Benefits: This credit reduces the overall tax burden for homeowners investing in renewable energy, making it more affordable to transition to clean energy.
Website: Residential Clean Energy Credit

2. Energy Efficient Home Improvement Credit (Section 25C)

Overview: The Energy Efficient Home Improvement Credit is a federal tax credit designed to incentivize homeowners to make energy-efficient improvements to their existing homes. This credit applies to a wide range of upgrades, including insulation, windows, doors, HVAC systems, and more.
Incentive Amount: Homeowners can claim 30% of the cost of eligible energy-efficient home improvements. However, the total credit you can claim in a year is capped at:
- $1,200 per year for general energy-efficient improvements and energy property costs. This includes:
  - Up to $250 per door (maximum of $500 for all doors)
  - Up to $600 for windows and skylights
  - Up to $150 for home energy audits
- $2,000 per year for specific high-efficiency improvements, such as:
  - Heat pumps
  - Biomass stoves or boilers
- The total credit you can claim in a year is the lesser of 30% of the improvement costs or the capped amount ($1,200 or $2,000, depending on the type of improvement).
- The annual maximum credit you can claim is $3,200 across all eligible improvements.
Eligibility: The credit is available for improvements made to your primary residence in the United States. The home must be an existing property that you improve or add onto (not a new construction). This credit is non-refundable, meaning it can only reduce the tax you owe and cannot result in a refund.
Benefits: The credit reduces the cost of making energy-efficient improvements by allowing homeowners to offset part of the expense through tax savings. It encourages investment in energy efficiency by making such improvements more affordable.
Website: https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit

3. Energy Efficient Commercial Buildings Deduction (Section 179D)

Overview: This deduction applies to the installation of energy-efficient building components such as HVAC systems, lighting, and building envelopes in commercial and large residential buildings.
Incentive Amount: For systems installed in 2023 or later, the deduction is the lesser of the cost of installed property or up to $1.00 per square foot for 50% energy savings. For earlier installations, the deduction can be up to $1.80 per square foot.
Eligibility: Available to owners of commercial and multifamily residential buildings that are at least three stories high.
Benefits: Reduces taxable income for property owners and developers who invest in energy-efficient improvements, making these upgrades more cost-effective.
Website: Energy Efficient Commercial Buildings Deduction

State Tax Credits (New York)

1. Solar Energy System Equipment Tax Credit

Overview: This New York State tax credit incentivizes the installation of solar energy systems in residential properties.
Incentive Amount: The credit is equal to 25% of the cost of purchasing and installing solar energy equipment, with a cap of $5,000.
Eligibility: Available to homeowners, including those in single-family and multifamily buildings.
Benefits: This credit makes solar energy more accessible by significantly reducing the net cost of installation.
Website: Solar Energy System Equipment Tax Credit

Local Incentives (New York City)

1. Solar and Electric Storage System Property Tax Abatement

Overview: NYC offers a property tax abatement for property owners who install solar energy systems or battery energy storage systems (BESS), helping to offset the cost of these installations. This abatement is part of the city’s efforts to encourage renewable energy use and enhance grid resiliency.
Incentive Amount: The abatement provides up to 30% of the installation cost of a solar PV system and/or BESS, with a maximum of $250,000 per project. The abatement is applied over a four-year period, allowing up to $62,500 per year in property tax reductions. This equates to a 7.5% reduction in property taxes per year.
Eligibility: This abatement is available to Class 1, 2, and 4 properties in New York City (all property types except Type 3, Utilities). However, properties that receive other exemptions such as ICAP, 421-a, 421-b, 421-g, or PILOTs are not eligible. Additionally, properties that are fully exempt from property taxes are also ineligible.
Benefits: The program significantly reduces the financial burden of installing solar systems and energy storage solutions, making renewable energy more accessible to NYC property owners.
Website: NYC Solar and Electric Storage System Property Tax Abatement

2. Local Law 97 Compliance Incentives

Overview: Local Law 97 requires large buildings in NYC to meet strict carbon emission limits starting in 2024. Various financial incentives are available to help building owners comply with these regulations, particularly for those who undertake energy efficiency projects.
Incentive Amount: Varies depending on the type of building and project. Examples include financing for energy-efficient upgrades through programs like the Green Housing Preservation Program and low-interest loans from the New York City Energy Efficiency Corporation (NYCEEC).
Eligibility: Applicable to large buildings in NYC, including those that contain affordable or rent-regulated housing.
Benefits: Provides financial support to help building owners meet the requirements of Local Law 97, avoiding penalties while improving energy efficiency.
Website: Local Law 97 Compliance Incentives

Additional Relevant Incentives Identified

1. 4% Low-Income Housing Tax Credit (LIHTC)

Overview: The 4% LIHTC is a federal tax credit program designed to encourage private developers and investors to create or rehabilitate affordable rental housing. It provides a tax credit that reduces the federal tax liability of those who invest in qualified affordable housing projects.
Incentive Amount: Developers can claim a tax credit worth 4% of the eligible construction or rehabilitation costs of a project each year for ten years. This credit helps offset the cost of creating affordable housing by reducing the developer’s tax bill, but it does not provide direct cash or low-interest loans.
Eligibility: The credit is available to developers who build or renovate housing where a portion of the units are set aside for low-income tenants, typically earning 60% or less of the area median income (AMI). The project must comply with specific affordability criteria and remain affordable for at least 30 years.
Benefits: The LIHTC reduces the financial burden on developers by allowing them to reduce their taxes over a ten-year period, making it easier to finance and complete affordable housing projects.
Website: https://hcr.ny.gov/low-income-housing-tax-credit-program-4pctRFP

2. 9% Low-Income Housing Tax Credit (LIHTC)

Overview: The 9% LIHTC is a federal tax credit program aimed at incentivizing private developers and investors to construct new affordable rental housing or substantially rehabilitate existing housing. The program offers a more substantial tax credit compared to the 4% LIHTC, making it highly competitive and desirable for financing affordable housing projects.
Incentive Amount: Developers can claim a tax credit worth 9% of the eligible construction or rehabilitation costs of a project each year for ten years. This credit significantly reduces the developer’s federal tax liability, making it a powerful tool for funding affordable housing.
Eligibility: The 9% credit is generally reserved for new construction or substantial rehabilitation projects that do not involve tax-exempt bonds. Developers must ensure that a portion of the units are set aside for low-income tenants, typically those earning 60% or less of the area median income (AMI). The affordability of these units must be maintained for at least 30 years.
Benefits: The 9% LIHTC offers a more substantial reduction in taxes compared to the 4% credit, making it particularly valuable for large-scale affordable housing projects. The credit helps bridge the financing gap, allowing developers to create more affordable housing units.
Website: https://hcr.ny.gov/low-income-housing-credit-program-9pctRFP