Combined Heat and Power

What is the tax incentive for Combined Heat and Power (CHP) property?

A 10% investment tax credit for CHP property, applicable to only the first 15MW of CHP property. 

Who is eligible for the incentives?

Owners of systems smaller than 50 MW may take advantage of this tax credit, and their systems must be placed into service between October 3, 2008 and January 1, 2017. Only the original constructor or user of the CHP property may take the tax credit.

What are the incentives and how do they work?

The incentive is an investment tax credit, a reduction in either overall individual or overall business tax liabilities. The incentive can also be applied to the alternative minimum tax. CHP system owners/users cannot take the credit until the year that the system is operational.

What do I have to do to qualify for the incentives?

To qualify, a CHP system must be 60 percent efficient (on a lower heating value basis), produce at least 20% of its useful energy as electricity and at least another 20% as useful thermal energy.

Where can I learn more about qualifying technologies and designs?

The Environmental Protection Agency’s CHP Partnership issued a useful write-up on the incentive and other alternative energy incentives. The Partnership summarizes eligible technologies and provides additional contact information here.

For more information on Combined Heat and Power, see http://aceee.org/chp.

Please note that combining this credit with other federal or state energy credits may reduce the amount of this or other credits. The IRS provides formulas for understanding the impact that these other "subsidized energy financing" mechanisms may have. Consult a tax professional for more information, and view the IRS's definition of "subsidized energy financing" here.

Footer Image