Clean energy tax incentives still add up: How schools can fund projects even post-OBBB
Clean energy projects are often a huge winner for schools. Energy projects create cost savings, demonstrate environmental leadership and provide educational benefits to students.
But in the wake of the One Big Beautiful Bill (OBBB) Act, the clock is fast running out on claiming many of the federal clean energy tax incentives schools rely on to pay for energy projects. Schools must now accelerate construction timelines to qualify for tax incentives before they expire, find alternative funding sources or pause work.
How should administrators make sense of all this? Keep reading to learn more about why clean energy benefits school districts and how to navigate the new funding realities that leaders face.
Why clean energy projects (still) make sense for schools
For most schools, the decision to invest in energy-efficient upgrades starts with one simple truth: Every penny counts. Tight budgets and rising costs have forced administrators to find new ways to stretch dollars. For many, energy is one of the few line items with room to move.
But cost savings are only part of the equation. Clean energy projects offer schools a way to demonstrate environmental leadership, meet building regulations and reflect the values of their communities.
Energy projects are also popular. In many cities and states, voters and caregivers are actively pushing for greener schools. Some cities also require buildings to meet specific energy performance standards, including schools.
All this puts schools on the front lines of change, even though they may operate in aging, inefficient facilities.
There are also educational benefits to going green. Solar panels and energy monitoring tools can double as STEM learning opportunities, helping students explore science, sustainability and data analysis in real time. Some schools have even developed curricula around their energy systems, giving students hands-on experience with emerging technologies and careers.
And while some credits and incentives (especially those involving solar or wind energy) are set to expire sooner than expected, there are still tax incentives available, both now and in the future.
Clean energy tax incentives can offset a significant share of the cost of clean energy systems. That kind of ROI is rare in school operations — and worth exploring.
Which clean energy tax incentives are available to schools in 2025 and into 2026?
Schools can access federal, state and local incentive programs — and combine them — to help offset the cost of energy-efficiency projects. Incentives are available for new construction and upgrades to existing facilities.
While some incentives are now phasing out, others are not. And even for sunsetting incentives, there’s still time to act. Most schools can benefit from:
Section 48, investment tax credit (ITC) or Section 48E, clean energy investment tax credit
The ITC allows schools to claim up to 30% of the cost of eligible clean energy projects, including solar panels, geothermal systems, battery storage and wind or biogas systems.
- Bonus credits (often called “adders”) can increase that value. Each adder is worth 10% if a project meets certain criteria, such as using domestically made materials or being located in an energy transition zone or low-income community.
- The key to maximizing savings is being proactive. Most credits have to be applied for before a system is placed in service, and eligibility for bonus credits may require documentation throughout design and construction. Schools that wait too long may miss out on savings.
- Note that some incentives, however, are retroactive, so be sure to look into those for past projects as well.
- One huge caveat here: Post-OBBB, to qualify for the section 48E clean energy investment tax credit, wind and solar clean energy projects must either begin construction by July 4, 2026, or be placed into service by December 31, 2027. In other words, a wind or solar project that starts after July 4, 2026, would need to enter service by the end of 2027 to claim 48E, while a project that begins before that date would not face that same deadline.
- Even projects that begin by July 4, 2026, generally must be placed in service by the end of 2030 to meet the safe harbor continuity requirement.
Direct pay for tax-exempt entities like schools
Traditionally, schools haven’t benefited from tax credits because they don’t pay taxes. That changed with the Inflation Reduction Act (IRA), which created a direct pay provision.
Now, public and nonprofit schools can receive the equivalent of a tax credit as a cash payment from the IRS. In many cases, that payment can be used as unrestricted cash, freeing up dollars for the general fund or to help pay down capital costs.
Section 179D, energy-efficient building upgrades
Schools that upgrade lighting, HVAC systems or building envelopes may qualify for an additional deduction under Section 179D. While public schools don’t take the deduction directly, they can allocate it to their project’s designer or engineer to incentivize energy-efficient planning.
But the OBBB created a ticking clock for schools that wish to claim 179D. Under the new tax rules, projects must begin construction by June 30, 2026, to qualify for 179D, which means administrators need to act fast.
EV infrastructure and clean bus funding
While more limited in scope, additional credits are available for schools that invest in EV charging stations, including a 30% credit for EV charging infrastructure. Note that to qualify for the 30% credit, you need to be in a low-income community and meet prevailing wage and apprenticeship requirements.
Like 179D, schools now face a June 30, 2026, deadline to begin construction in order to qualify for the EV charging station credit.
State and local incentives
Many states and utility providers offer their own grants, rebates and low-interest financing programs. For example, Wisconsin’s Focus on Energy program offered the Black River Falls School District a $13,500 rebate for its solar array. The district combined the local rebate with the 30% ITC credit, saving nearly $100,000 on a $290,000 project.
What should schools know before starting a clean energy project?
Schools have unique considerations that can affect the timing and financial outcome of energy-efficiency projects. Understanding these details early can help administrators plan effectively — and maximize the incentives their schools receive.
- Fiscal year versus calendar year: Most tax credits operate on a calendar-year basis, while most schools align their fiscal years to the school calendar. This mismatch can affect the timing of direct pay filing or when they receive payment from the IRS. Schools need to understand the cash flow impact and plan carefully if there’s a delay between project completion and reimbursement.
- Upfront costs and financing: Federal tax credits (or direct pay reimbursements) only arrive after the project is complete and filed with the IRS, which means schools or districts have to cover the upfront costs. To do that, schools typically rely on general funds, capital budgets, bond financing or restricted accounts — some of which may require school board or community approval, which can extend timelines and complicate the process. Certain financing types may also cause a reduction of a credit, so managing financing sources for the energy system is critical.
- Limited window remains for certain credits: While some energy tax incentives are sunsetting (especially for solar, wind and EV charging stations), there is still time to act from now through mid-2026. You will need to assess current or planned projects in this light. Note that geothermal systems were not affected by the OBBB, so any current federal geothermal incentives remain in place until 2033.
- Bonus credits require homework: Schools hoping to qualify for ITC “adders” should know they require early documentation and sometimes preapproval. Do your homework. Being proactive can mean the difference between a 30% tax credit and a 50% one.
How should schools find incentives and begin a clean energy project?
Whether your school is planning a major renovation or just looking to reduce utility costs, take these steps to maximize your savings with energy incentives:
1. Assess your project based on changes to energy incentives
If you have a clean energy project already underway or are planning to start one soon, you need to figure out how you’re impacted by the OBBB’s changes to clean energy incentives. Especially if your project involves wind or solar energy, you’re likely facing a short runway to claim incentives, so you need to know what you’re dealing with.
Work with your tax advisor and construction partners to understand whether your existing timeline will leave you eligible for key tax incentives. If there’s a problem, find out if you can speed up construction — or if you’ll have to find alternative funding sources to replace tax incentives that will soon no longer exist.
2. Get your team involved early
If you’re planning new construction or capital improvements, get your full team involved early, including architects, contractors, finance staff and tax partners. Many federal incentives, such as those tied to prevailing wage or domestic content requirements, need to be verified throughout design and construction — not after the fact.
Early coordination helps ensure your project is eligible for the maximum credits and has the right documentation from day one.
2. If you’re not building, start with an energy audit
Did you know you don’t have to undertake a capital project to qualify for energy tax incentives? To find out what you qualify for, start with a free or low-cost energy audit.
Many state programs offer audit services tailored to schools. These assessments can identify areas for improvement, such as lighting, boiler systems or HVAC units, and help you prioritize projects based on cost savings and available incentives.
An energy audit can also help you right-size your investment. Many schools jump straight to solar without reducing their energy load. But by improving efficiency first — for example, by replacing outdated lighting or upgrading controls — you may be able to reduce your overall energy needs. That means you can install a smaller, more cost-effective solar array.
An energy audit can help you develop a broader strategy to lower your environmental footprint and project costs, versus relying on a standalone solution.
3. Designate a small internal team
Appoint a small group of staff to explore energy upgrades and incentives, including representatives from facilities, finance and administration. This team can champion projects, coordinate with outside partners and build buy-in across the district.
4. Engage trusted partners
You don’t need to navigate this process alone. Energy consultants, CPAs and tax advisors with experience in the IRA and the OBBB, solar providers and utility partners can help with assessments, modeling and incentives. Many solar providers offer free proof-of-concept studies that estimate savings, payback periods and system size based on your current energy use.
Engaging experienced partners early can help you make informed decisions, line up funding and capture the full value of available incentives.
How Wipfli can help
Energy tax incentives offer significant financial benefits — if you know where to start. We do. Contact us for a free estimate of what incentives you qualify for and how much.
Let’s talk energy tax incentives
