How to Reduce Passive Income Taxes with Clean Energy Credits

TL;DR

High-net-worth individuals with passive income from real estate, investments, or partnerships can reduce their federal tax liability using Renewable Energy Tax Credits (RETCs). These credits, now transferable under IRS rules, allow eligible taxpayers to offset passive income taxes while supporting verified clean energy projects. This blog explains how it works and how B10 Energy helps streamline the process.

How to Reduce Passive Income Taxes with Clean Energy Credits

For high-net-worth individuals (HNWIs), passive income is often a double-edged sword: it builds wealth, but it can also trigger significant tax obligations. Whether it’s rental income, partnership earnings, or royalties, passive income is taxed — and in some cases, heavily.

What many investors and advisors don’t know is that there’s a powerful, IRS-approved strategy to legally reduce that tax burden: Renewable Energy Tax Credits (RETCs).

What Are Renewable Energy Tax Credits (RETCs)?

RETCs are federal tax credits designed to incentivize investment in renewable energy infrastructure — like solar, wind, or geothermal projects. Thanks to updates from the Inflation Reduction Act, these credits are now transferable, which means:

• You don’t have to build or manage a renewable energy project
• You can purchase credits directly from verified providers
• You can apply them to offset eligible tax liability – including passive income taxes

Who Can Use RETCs to Offset Passive Income?

RETCs can’t be used by just anyone. They’re reserved for certain types of taxpayers under IRS rules.

Here’s who qualifies:

• Individuals who earn passive income (rental income, K-1 partnership income, royalties, etc.)
  
  
• The income must be considered “passive activity income” under IRS definitions
  
  
• The tax liability must come from federal income taxes, not payroll or self-employment taxes
  
  

This makes RETCs an ideal tool for:

• Real estate investors
  
  
• Private equity partners
  
  
• LPs or GPs with flow-through earnings
  
  
• High-income earners looking to optimize passive income tax exposure
  
  

If you're unsure whether your income qualifies, B10 Energy can help you (and your CPA) determine eligibility quickly and accurately.

Why Passive Income Tax Is So Challenging

Passive income is taxed at the federal level, often at ordinary income rates. And while many deductions or losses can offset passive income, there are limits on how much can be written off — and when.

That’s where RETCs come in.

Unlike typical write-offs, RETCs are dollar-for-dollar credits that reduce taxes owed — not just taxable income. This makes them one of the most direct and impactful tools available for eligible high earners.

How It Works: Using RETCs to Reduce Passive Income Taxes

Let’s break it down into a simple four-step process:

Step 1: Confirm Eligibility

Make sure your income qualifies as passive under IRS rules, and that your tax situation allows for credit application.

Not sure? B10 Energy works with CPAs to verify that upfront.

Step 2: Estimate Your Tax Liability

Work with your advisor to determine your projected federal tax owed on passive income. RETCs can typically be used to offset up to 75% of your liability in a given year.

Step 3: Purchase Verified Energy Credits

B10 Energy sources IRS-compliant, transferable credits tied to certified renewable energy projects. You receive all required documentation and reporting for your CPA.

Step 4: Apply the Credit

Once purchased, the credit is applied to your passive income tax liability — reducing the amount you owe the IRS, dollar for dollar.

Why This Strategy Appeals to HNWIs

High-net-worth individuals are always seeking legal, low-risk, high-impact tax strategies. RETCs check every box:

• They’re not aggressive or subject to IRS scrutiny (when sourced properly)
  
  
• They’re scalable — whether you’re offsetting $50K or $500K in tax liability
  
  
• They align with values — especially if you support sustainability, clean energy, or ESG-aligned investments
  
  

They’re also incredibly efficient. Once you understand how RETCs work, the process takes far less time and effort than many complex planning tools.

Client Case Study: Leveraging RETCs to Support Passive Income Tax Planning

David, a high-net-worth real estate investor based in Texas, earned over $900,000 in passive income last year through his rental portfolio. While his CPA had already applied depreciation and other standard strategies, David still faced a substantial federal tax liability tied to his passive earnings.

Looking for a complementary approach, his advisor introduced him to B10 Energy to explore Renewable Energy Tax Credits (RETCs) as part of a broader tax strategy.

Working closely with David’s CPA, B10 confirmed eligibility, evaluated projected tax exposure, and sourced $450,000 in fully documented, IRS-compliant energy credits. These credits were applied to offset 75% of his passive income tax liability for the year — all without disrupting his existing investment structure.

Through the collaboration, David:

• Reduced his federal tax liability tied to passive income
  
  
• Met all IRS requirements for credit usage and reporting
  
  
• Supported a renewable energy project — with no operational involvement

What You’ll Need to Use RETCs Properly

To ensure IRS compliance and full benefit, you’ll need:

• A verified credit provider (like B10 Energy)
  
  
• IRS transfer documentation (we provide this)
  
  
• Chain of title and project validation
  
  
• CPA guidance (we’re happy to coordinate directly with your current CPA)
  
  

This isn't something to source off the internet or from an unvetted promoter. Credits must come from eligible projects, and the transfer must follow the current tax code to be valid.

‍

Avoiding Common Mistakes with Energy Credits

Here’s what to watch out for:

‍Buying from an unverified source

Credits without documentation are unusable and could trigger an audit.

Misapplying credits to non-passive income
The IRS won’t allow RETCs to offset active income (like W-2 wages or consulting income) unless you’re a C-corp.

Over-purchasing
If you buy more credits than you can use in a given year, you may not be able to carry them forward, depending on how they were issued.

That’s why working with a trusted partner — and involving your CPA — is essential.

How B10 Energy Makes It Simple

We specialize in making energy credits accessible and safe for high-income individuals. Our process is built around simplicity, transparency, and trust:

• We source only IRS-verified credits
  
  
• We provide all necessary documentation
  
  
• We ensure eligibility screening up front
  
  
• We coordinate with your CPA or advisor
  
  
• We support you through application and reporting
  
  

You get the benefit of a powerful tax credit without complexity or risk.

‍

Frequently Asked Questions

Q: Do I have to be an investor in the energy project?

A: No. With transferable credits, you can simply purchase them — no ownership or involvement is required.

Q: Can I use RETCs for rental income?

A: Yes, if your rental income is considered passive (most long-term real estate holdings are).

Q: Can I carry credits forward if I don’t use them all?

A: In some cases, yes — but this depends on the specific credit and IRS rules. B10 Energy can advise during the sourcing process.

‍

Conclusion: A Smarter Way to Handle Passive Income Taxes

For high-net-worth individuals, passive income is a financial win — but it can bring tax challenges. Renewable Energy Tax Credits offer a powerful solution: they’re legal, effective, and aligned with sustainability goals.

Whether you’re a real estate investor, fund partner, or just tired of overpaying on passive income taxes, RETCs may be your next best move.

Want to reduce your passive income tax bill — legally and impactfully?

Contact B10 Energy to explore Renewable Energy Tax Credits that align with your income, values, and long-term tax strategy.