Form 3468 is the IRS form you file to calculate and claim the investment tax credit for qualifying energy property and clean electricity facilities. The credit reduces your tax bill dollar for dollar, at a base rate of 6% of your qualified investment or an enhanced rate of 30% if your project meets prevailing wage and apprenticeship standards. Bonus adders for domestic content, energy communities, and low-income communities can push the percentage higher. You attach the form to your income tax return, and the credit flows through Form 3800.
Which Credit Your Project Falls Under
Form 3468 covers two different energy investment credits, and which one you use depends mostly on when your property was placed in service. The traditional energy credit under Section 48 applies to a defined list of property types: solar, geothermal, fuel cell, microturbine, combined heat and power, small wind, energy storage, biogas, geothermal heat pumps, waste energy recovery, and microgrid controllers.1Office of the Law Revision Counsel. 26 U.S. Code 48 – Energy Credit The Inflation Reduction Act added standalone energy storage to that list, so batteries no longer have to be paired with a generation source.
The clean electricity investment credit under Section 48E takes a different approach. Rather than listing technologies, it covers any electricity-generating facility placed in service after December 31, 2024, whose anticipated greenhouse gas emissions rate is zero or below, plus standalone energy storage.2Office of the Law Revision Counsel. 26 U.S. Code 48E – Clean Electricity Investment Credit For most new solar, wind, and other zero-emission projects placed in service in 2025 or later, Section 48E is the relevant credit. Section 48 still applies to property that doesn’t fit the zero-emissions framework or to projects that began construction under the older rules.
On the form itself, Section 48 credits are calculated in Part VI, and Section 48E credits use Part V.3Internal Revenue Service. Instructions for Form 3468 The rate structure is identical.
Wind and Solar Construction Deadline
Recent legislation ends the Section 48E credit for wind and solar facilities placed in service after December 31, 2027, if construction begins after July 4, 2026. To preserve eligibility, physical work of a significant nature must begin before July 5, 2026. Spending on planning or preliminary activities won’t satisfy the test.4Internal Revenue Service. Sections 45Y and 48E Beginning of Construction Notice For a wind or solar developer, this deadline matters more than any other timeline in the credit rules.
Base and Enhanced Rates
Both credits use the same two-tier structure. The base rate is 6% of qualified investment. The enhanced rate is 30% and applies when the project meets prevailing wage and apprenticeship requirements.1Office of the Law Revision Counsel. 26 U.S. Code 48 – Energy Credit The prevailing wage requirement means paying all laborers and mechanics involved in construction, alteration, or repair no less than the rates the Department of Labor sets for their job classification and area. The apprenticeship requirement means employing apprentices from registered programs for a specified share of total labor hours.5Internal Revenue Service. Prevailing Wage and Apprenticeship Requirements
Two categories of projects get the 30% rate without meeting the labor standards: facilities with a maximum output under 1 megawatt, and facilities whose construction began before January 29, 2023.5Internal Revenue Service. Prevailing Wage and Apprenticeship Requirements Everyone else documents compliance or takes 6%. On a $2 million solar project, that’s $120,000 versus $600,000.
Bonuses That Raise the Percentage
Three bonus adders can stack on top of the base or enhanced rate.
Domestic content. Projects using domestically manufactured components get an additional 10 percentage points. All steel and iron used must be produced in the United States, and a minimum share of manufactured components must be domestic. For projects beginning construction in 2026, the manufactured components threshold is 50% for most facilities and 35% for offshore wind.6Office of the Law Revision Counsel. 26 USC 48E – Clean Electricity Investment Credit Combined with the enhanced rate, this brings the credit to 40%.
Energy community. Projects sited in an energy community earn another 10 percentage points. The IRS defines three categories: brownfield sites, areas with significant fossil fuel industry employment and above-average unemployment, and census tracts where a coal mine closed after 1999 or a coal-fired power plant retired after 2009.7Internal Revenue Service. Frequently Asked Questions for Energy Communities The IRS updates its lists of qualifying areas, so verify before assuming a site qualifies.
Low-income community. Smaller projects in low-income communities or on Indian land can receive an additional 10 percentage points. Projects that are part of a qualified low-income residential building project or provide direct economic benefit to low-income households can receive 20. These bonuses are subject to an annual capacity allocation of 1.8 gigawatts, so you have to apply for and receive an allocation from the IRS before claiming.8Federal Register. Guidance on Clean Electricity Low-Income Communities Bonus Credit Amount Program Not every qualifying project gets one.
Filling Out the Form
File a separate Form 3468 for each qualifying facility or property. Every form starts with Part I, which collects identifying information: a description of the property, its location, the date placed in service, and whether prevailing wage and apprenticeship requirements were met.3Internal Revenue Service. Instructions for Form 3468
From there you complete the part that matches your credit. Part V is the clean electricity investment credit under Section 48E. Part VI is the energy credit under Section 48, with separate sections for solar, geothermal, fuel cell, microturbine, combined heat and power, and other property types. Parts II through IV cover qualifying advanced coal projects, gasification projects, advanced energy projects under 48C, and advanced manufacturing under 48D. Part VII is the rehabilitation credit under Section 47, which shares the form but has nothing to do with energy.
Inside the relevant part, you enter the qualified investment basis, select 6% or 30%, and multiply to get the tentative credit. Each part has lines for the basis reductions described below. The result carries to Form 3800, the General Business Credit.9Internal Revenue Service. About Form 3468, Investment Credit
Form 3468 doesn’t go to the IRS on its own. It attaches to your income tax return: Form 1040 for individuals, Form 1120 for corporations, or the applicable return for your entity type. For individuals, the allowable credit from Form 3800 lands on Schedule 3 of Form 1040. The credit is nonrefundable for most taxpayers, meaning it can reduce your tax to zero but won’t generate a refund by itself.3Internal Revenue Service. Instructions for Form 3468 Tax-exempt entities eligible for direct pay are the exception.
Adjustments That Reduce Your Basis
Your credit starts with the qualified investment basis, generally what you paid for the property, but several adjustments can shrink that number before you multiply by the rate.
Non-taxable grants, rebates, and subsidized energy financing reduce basis dollar for dollar. Property financed with proceeds from tax-exempt private activity bonds is excluded to the extent of that financing.3Internal Revenue Service. Instructions for Form 3468
Section 49’s at-risk rules reduce basis by the amount of any nonqualified nonrecourse financing. Qualified commercial financing generally means a loan from an unrelated commercial lender where the nonrecourse portion doesn’t exceed 80% of the property’s credit base.10Office of the Law Revision Counsel. 26 USC 49 – At-Risk Rules For partnerships and S corporations, this test applies at the partner or shareholder level, so different investors in the same project can end up with different credit amounts.
After calculating the credit, you reduce the depreciable basis of the property by half the credit amount. A $300,000 credit means a $150,000 basis reduction for depreciation purposes. This prevents claiming the credit and depreciating the full cost.
Passive activity rules catch more investors than they expect. If you don’t materially participate in the project, which is the common situation for limited partners in solar or wind deals, the credit is treated as a passive activity credit and only offsets tax from passive income. Unused amounts carry forward automatically.11Office of the Law Revision Counsel. 26 U.S. Code 469 – Passive Activity Losses and Credits Limited
Pre-Filing Registration for Transfers or Direct Pay
If you plan to transfer the credit to another taxpayer or elect direct pay, you register through the IRS Energy Credits Online portal before filing. Registration opens after the property is placed in service and should be completed at least 120 days before the due date, including extensions, of the return on which you claim the credit. Each facility needs its own registration number, and that number goes on the return.12Internal Revenue Service. Register for Elective Payment or Transfer of Credits Miss the window and you lose the election, so build the registration into the project timeline.
Recapture Within Five Years
The investment credit carries a five-year string. If you sell the property or stop using it as investment credit property before five full years have passed from the placed-in-service date, part of the credit comes back as additional tax:13Office of the Law Revision Counsel. 26 U.S. Code 50 – Other Special Rules
- Within year 1: 100% recaptured
- Within year 2: 80%
- Within year 3: 60%
- Within year 4: 40%
- Within year 5: 20%
After five full years, recapture drops to zero. Recapture also applies under Section 48E if the IRS determines the facility’s actual greenhouse gas emissions rate exceeds 10 grams of CO2 equivalent per kilowatt-hour.2Office of the Law Revision Counsel. 26 U.S. Code 48E – Clean Electricity Investment Credit The recaptured amount is added to tax for the year the triggering event happens.
Transferring the Credit or Getting Paid Directly
Two Inflation Reduction Act mechanisms let you monetize the credit if your own tax liability can’t absorb it.
Under Section 6418, any taxpayer earning a Section 48 or 48E credit can sell all or part of it to an unrelated buyer for cash. The buyer claims the credit on their own return. The cash received isn’t taxable income to the seller, and the buyer can’t deduct the purchase price.14Office of the Law Revision Counsel. 26 U.S. Code 6418 – Transfer of Certain Credits The election is irrevocable once made, and transferred credits can’t be carried back by the buyer. Both parties need the ECO portal registration number, which is why the registration window matters so much.
Under Section 6417, certain entities that typically don’t owe federal income tax can elect to receive the credit as a direct payment. Eligible entities include tax-exempt organizations, state and local governments, tribal governments, the Tennessee Valley Authority, Alaska Native Corporations, and rural electric cooperatives.15Office of the Law Revision Counsel. 26 U.S. Code 6417 – Elective Payment of Applicable Credits The entity files Form 3468 and Form 3800 with its applicable return (often Form 990-T) and receives the credit as a payment from the IRS.3Internal Revenue Service. Instructions for Form 3468
For taxable businesses, direct pay is generally not available for the energy investment credit. Credit transfers under Section 6418 are the workaround.