ITC/PTC Calculator
Investment and production tax credit for solar projects.
About this calculator
Under the Inflation Reduction Act, a solar project must choose between two mutually exclusive federal incentives — never both — and this calculator computes both in parallel so you can see which one actually delivers more value for your specific project. The Investment Tax Credit is a one-time credit sized as a percentage of total project cost: under IRC Section 48(a), a 6% base rate jumps to 30% (a 5x multiplier) if the project meets prevailing wage and apprenticeship requirements, with optional +10-percentage-point bonus adders stacked on top for domestic content and for being located in a designated energy community. The Production Tax Credit instead pays per kWh of actual electricity generated over 10 years; the calculator mirrors IRC Section 45(b)(6)'s own 5x multiplier structure here by dividing the entered PTC rate by 5 whenever prevailing wage isn't met, since the statute's headline PTC rate already assumes labor standards are satisfied. Both provisions, as written, apply this base-plus-adder structure to property the construction of which begins before January 1, 2025 — projects starting construction on or after that date generally shift to the IRA's technology-neutral Clean Electricity Investment and Production Tax Credits (IRC Sections 48E and 45Y), which carry a similar bonus-adder design but are a separate statutory provision, so always confirm which section actually governs a given project's construction-start date.
To compare a lump-sum credit against a decade of per-kWh payments on equal footing, the 10-year PTC stream is discounted to net present value at a fixed 7% rate, and whichever figure — ITC amount or PTC NPV — comes out higher is flagged as recommended and used to compute the project's effective post-credit cost. A "tax equity value" is also shown, grossing the winning credit up by dividing by your federal tax rate — a rough proxy for how much pre-tax project value that credit is worth to an investor. This is a simplified planning model: it doesn't account for credit transferability, direct-pay elections for tax-exempt entities, phase-downs, or the complexities of actual tax-equity partnership structuring.
Inputs
Results
Best credit value ($)
$600,000.00
≈ 14 Teslas
Figures current as of 2026. Sources: 26 U.S.C. § 48(a) (Investment Tax Credit), as amended by the Inflation Reduction Act of 2022, 26 U.S.C. § 45(b)(6) (Production Tax Credit), as amended by the Inflation Reduction Act of 2022
How to Use This Calculator
- Enter the total project cost and system capacity in kW DC.
- Set peak sun hours and system derate factor for annual production estimates.
- Toggle prevailing wage (required for full 30% ITC), domestic content bonus, and energy community bonus.
- Enter the current PTC rate and federal tax rate.
- Review the recommended credit (ITC vs. PTC), credit value, and effective project cost after incentives.
How the result changes with Total project cost ($)
| Total project cost ($) | Best credit value ($) |
|---|---|
| 1,000,000 | $300,000.00 |
| 1,500,000 | $450,000.00 |
| 3,000,000 | $900,000.00 |
| 5,000,000 | $1,500,000.00 |
What each input means
- Total project cost ($)
- Total eligible installed cost of the solar project.
- System capacity (kW DC)
- Installed DC capacity.
- Peak sun hours (PSH)
- Average daily peak sun hours at project site.
- System derate factor
- Overall DC-to-AC system efficiency.
- Prevailing wage met (0/1)
- 1 = project meets prevailing wage & apprenticeship requirements (5× credit).
- Domestic content bonus (0/1)
- 1 = project qualifies for +10% domestic content bonus.
- Energy community bonus (0/1)
- 1 = project is in an energy community for +10% bonus.
- PTC rate ($/kWh)
- Current PTC base rate (with prevailing wage). ~$0.0275/kWh for 2024.
- Federal tax rate
- Corporate federal income tax rate for tax equity valuation.
What each result means
- Best credit value ($)
- Higher of ITC amount or PTC net present value.
- Effective ITC rate (%)
- Combined ITC percentage including bonus adders.
- ITC credit amount ($)
- One-time Investment Tax Credit value.
- Annual PTC credit ($)
- Per-year Production Tax Credit value.
- Total PTC over 10 years ($)
- Undiscounted sum of 10 years of PTC.
- PTC net present value ($)
- NPV of 10-year PTC stream at 7% discount rate.
- Recommended (1=ITC, 2=PTC)
- Which credit type provides more value.
- Effective project cost ($)
- Project cost after applying the recommended credit.
- Annual production (kWh)
- Estimated annual electricity output.
How this is calculated
Worked example, using the default values
- Identify Input Parameters4 parametersTotal project cost ($) = 2000000, System capacity (kW DC) = 1000, Peak sun hours (PSH) = 5, System derate factor = 0.8 = 9 input(s) provided
- Calculate Best credit value600000 = $600,000
- Calculate Effective ITC rateEffective ITC rate = itcBaseRate + domesticBonus + communityBonus30 = 30%
- Calculate ITC credit amountITC credit amount = totalProjectCost * totalItcRate600000 = $600,000
Figures and sources
- ITC base rate, prevailing-wage/apprenticeship 5x multiplier, and domestic content and energy community bonus adders (2026) — 26 U.S.C. § 48(a) (Investment Tax Credit), as amended by the Inflation Reduction Act of 2022
- PTC prevailing-wage/apprenticeship 5x credit multiplier (2026) — 26 U.S.C. § 45(b)(6) (Production Tax Credit), as amended by the Inflation Reduction Act of 2022
Engine last updated . Checked against 2 independently-derived tests — how we verify calculators. Built by Paul Gunder, a software engineer, not a licensed financial, medical, or legal professional.
Frequently Asked Questions
Why does the PTC rate get divided by 5 when the prevailing wage box is unchecked?
Under IRC Section 45(b)(6), the headline PTC rate you'd enter (like the default 2.75 cents/kWh) already assumes prevailing wage and apprenticeship requirements are met — without them, the statute reduces the credit to one-fifth of that rate. This calculator mirrors that structure directly: it divides your entered PTC rate by 5 whenever the prevailing wage toggle is off, rather than requiring you to re-enter a different base rate.
Can a solar project actually claim both the ITC and the PTC?
No — a project must elect one or the other, never both, which is exactly why this calculator computes both credits in parallel and recommends whichever produces more value rather than summing them together. The 'best credit value,' 'recommended credit,' and 'effective project cost' outputs are all based on whichever single credit wins the comparison.
Why is the 10-year PTC stream discounted to net present value before comparing it to the ITC?
The ITC is realized as a single lump-sum credit in year one, while the PTC pays out gradually over a full decade of production — comparing the two dollar-for-dollar without discounting would make the PTC look more valuable than it really is in today's-dollar terms. Discounting the 10-year PTC stream at 7% puts both incentives on an equal, present-value footing before the calculator flags which one is actually worth more.
What does the "tax equity value" output represent, and why is it computed by dividing rather than multiplying?
It's a rough proxy for how much pre-tax project value the winning credit represents to a tax-equity investor, since tax credits are only useful to an entity with enough tax liability to absorb them. Dividing the credit amount by the federal tax rate grosses it up to the pre-tax dollar figure that would be needed to generate that much credit value, which is a simplified way of sizing the tax appetite a tax-equity partner would need.
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