Managing Investment Tax Credits -- Seeking Advice

IL · Member since 2026 · 4 posts · 2 votes

Howdy internet,

i'm pretty new to the real estate game and am hoping to get some advice.
I have a few properties on which we are doing a solar install.

These will generate a federal tax credit via the Investment Tax Credit program.
I'm not sure what to do with these credits -- we won't really generate enough profit this year to take advantage of everything.

Anyone have experience with these things?

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Julius VincentBusiness Member

Tax Strategist | CPA, MBA + Wharton FP&A | CFO-Level Planning · Houston, TX · Member since 2025 · 157 posts · 172 votes

It actually works in reverse for rentals. Since these are rental properties, the credit here is the business solar credit (generally 30 percent for systems under a megawatt), and it lands as a passive activity credit. That means it offsets tax on your rental income, not your W-2 income. Good thing is that unused credit carries forward indefinitely until the rentals produce taxable income or the classification of the activity changes. And once credit does become usable, clean energy credits can reach back 3 years and forward 22.

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Rohullah Sharifi
Dr · VA · Member since 2025 · 154 posts · 34 votes
1mo
Credits are for adjustments towards your active income. if you don't have much of high income, it would go waste.
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Julius VincentBusiness Member
Tax Strategist | CPA, MBA + Wharton FP&A | CFO-Level Planning · Houston, TX · Member since 2025 · 157 posts · 172 votes
3w
It actually works in reverse for rentals. Since these are rental properties, the credit here is the business solar credit (generally 30 percent for systems under a megawatt), and it lands as a passive activity credit. That means it offsets tax on your rental income, not your W-2 income. Good thing is that unused credit carries forward indefinitely until the rentals produce taxable income or the classification of the activity changes. And once credit does become usable, clean energy credits can reach back 3 years and forward 22.
[email protected]281-407-7353
Horizon Wealth & Tax Advisors510 Reviews
Website View Page
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Marina Draper
Accountant · We serve all 50 states · Member since 2015 · 90 posts · 50 votes
3w
For rental properties, the main issue is usually the passive-activity credit rules and limitations. Unless the rental activity qualifies as nonpassive, the solar credits generally can offset only the federal tax attributable to passive income, not tax on wages or other active income.
Typically, a credit that can’t be used currently may be carried forward. Depending on the ownership structure and the specifics, you may also be able to transfer the credit to an unrelated taxpayer for cash.

I would review the projected credit, passive/active income from all your properties and businesses, entity structure, depreciation impact, and whether carrying or transferring the credit produces the better result and discuss it with a tax professional who can advise you on the best way to move forward.

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