The following is a fully worked example for your outputs as a tax expert. It includes a Task Prompt (including the legend), a Golden Response (not required -- just for your intuition), a Golden Response Rubric, and a Golden Chain-Of-Thought (CoT) Rubric. All numbers should be internally consistent. However, this is not necessarily representative of a good or even legitimate energy tax credit optimization strategy -- we developed this example to show you how you should be approaching the task structurally. Lean into your expertise!
You are advising a Residential in Villas, NJ with the goal of developing an optimal tax credit strategy. Base your analysis on the Internal Revenue Code as enacted by the Inflation Reduction Act of 2022, One Big Beautiful Bill Act of 2025, applicable Treasury regulations, and IRS guidance in effect as of the placed-in-service date [14].
The property is located at 226 E New York Ave, Villas, NJ 08251 (39.024305610719, -74.927918385514) [1], in census tract 34009021804 [2]. This tract does not qualify for Energy Community status [3] based on the definition and mapping data applicable as of 2025-12-31 [14]. The property is served by Atlantic City Electric [4]. Here are the property's characteristics: 1066 sqft single-family, built 1952, 10,000 sqft lot, 3 parking spaces [5].
The property is used as a short-term (Airbnb) for 5 months of each year and as a primary residential property for the remaining 7 months of the year. For 2025, assume the property is rented 128 days, vacant 26 days, and used 26 days for repairs/turnover with no personal enjoyment. Strictly evaluate this project under IRC §25C, §25D (Residential Clean Energy Credit) and §30C (Alternative fuel vehicle refueling property credit). Do not apply IRC §48 or §48E (Business Investment Tax Credits), even if the property has a partial business use.
The owner is planning a comprehensive energy upgrade that includes a roof-mounted solar PV system sized at 6 kW [6], designed to produce approximately 8,435 kWh per year [7] based on the site's solar resource and typical system losses. The total cost of the solar PV system is $18,500.
Replacement of an aging conventional HVAC system with a cold-climate electric heat pump with a representative seasonal efficiency (COP) of 16 SEER2 / 9 HSPF2 [8], suitable for the local climate. Total cost of heat pump is $9,000. Installation of a Level 2 EV charger rated at Level 2 EV charger rated at 9.6 kW (Level 2) - total cost $4,000 [9] on a dedicated 240V circuit. The overall turnkey project is quoted at a total installed cost of 31,500 USD [10]. This is a hard cap [10] for the homeowner.
Evaluate this project strictly under IRC §25C, §25D, and §30C. Do not apply business-related credits (IRC §48) or 'Domestic Content' bonus adders, as they are not applicable to the §25C and §25D residential credit.
The client's estimated annual federal income tax liability is 1,500 USD for 2025 and 2,000 USD for 2026 [12]. For 2025 only, assume the taxpayer also has $400 of foreign tax credit and $1,100 of other nonrefundable credits; apply nonrefundable credit ordering when determining how much of §25C and §25D can be used in 2025 and any carryforward (if permitted). The homeowner expresses a credit strategy preference if there is ever a need to choose between equivalent values [13]: Maximize year-one tax credit.
Assume the contract is signed on 2025-12-02 [14], and the project is placed in service on 2025-12-31 [15]. However, assume the heat pump is placed in service on 2025-12-15 [16], the solar PV system is placed in service on 2026-01-20 [17], and the EV charging system placed in use on 2026-01-15 [18]; apply the correct placed-in-service year separately for each component. Energy Community status does not apply for the placed-in-service year [3].
For every key recommendation or numeric output, briefly explain how you derived it and how it relates to the inputs [1]–[18]. Base all determinations only on statutory rates, thresholds, eligibility rules, and credit mechanics that were in effect as of the placed-in-service date**(s) [15]–[18]**. This task is limited exclusively to tax credit eligibility, credit rates, eligible basis, and carryforward treatment.
Your task: Recommended Federal and State Credit Path: Identify the applicable federal and New Jersey tax credit path, including any tax exemptions available, under statutes and regulations in effect as of [15], with clear justification based on the project specifics.
Bonus Eligibility Determination: Evaluate whether any bonus or adder provisions are statutorily applicable; if none apply, explicitly state and justify why.
Credit Rate Breakdown: State the applicable base credit rate and confirm whether the final credit rate differs from the base rate.
Total Credit Value: Quantify the federal tax credit value in dollars for Solar PV system and electric heat pump based on the eligible portion of the total installed cost [10].
Eligible vs. Non-Eligible Basis: Identify which components of the project qualify for the credit and which do not, if relevant.
Tax Capacity & Timing Analysis: Evaluate how the client's annual tax liability [12] interacts with the credit value, determining year-one utilization and any carryforward treatment permitted under rules in effect for the placed-in-service year, considering the owner's stated preference [13].
Documentation Required: List all relevant forms and documentation required to claim the Federal and State tax credits.
Legend:
[1] 226 E New York Ave, Villas, NJ 08251 (39.024305610719, -74.927918385514) – street address & coordinates (latitude, longitude)
[2] 34009021804 – census tract ID
[3] No – Energy Community status/rationale
[4] Atlantic City Electric – utility service territory
[5] 1066 sqft single-family, built 1952, 10,000 sqft lot, 3 parking spaces – property characteristics
[6] 6 kW – PV capacity
[7] 8,435 kWh – expected annual PV generation
[8] 16 SEER2 / 9 HSPF2 – representative seasonal heat pump COP
[9] Level 2 EV charger rated at 9.6 kW (Level 2) – EV charger power rating
[10] 31,500 USD – total installed cost [11] Hard Cap – budget type
[12] 1,500 USD for 2025 and 2,000 USD for 2026 – tax liability estimate
[13] Maximize year-one tax credit – credit strategy preference [14] 2025-12-02 – contract signing date [15] 2025-12-31 – placed in service date
[16] 2025-12-15 – heat pump placed in service date
[17] 2026-01-20 – solar PV placed in service date
[18] 2026-01-15 – EV charger placed in service date
Bold Text = Added complexities to prompt
Full Task Example Available Here
This include the Response Rubric and Chain of Thought.