Energy-Efficiency Tax Credits for Small Businesses

Posted by: Anna | 04/06/2017 at 09:00 AM

Energy-Efficiency Tax Credits for Small Businesses

Before the 2016 tax year is over, be sure to claim energy-efficiency tax credits for your small business if applicable. Tax credits can provide great savings by reducing the amount of income tax you owe. Unlike a tax deduction, a tax credit is a dollar-for-dollar reduction of the amount of income tax you have to pay. And, tax credits are typically created to reward and/or encourage businesses to build and invest in things that benefit the environment and economy—like using green technology.

Because of ever-changing markets and innovative technologies, it’s not guaranteed that energy-efficiency tax credits will always be available. So, it’s important for you to claim them now before they expire. Here are two tax credits you might want to consider for your energy-efficient business.

Business Energy Investment Tax Credit

The Business Energy Investment Tax Credit (ITC) is a tax credit for eligible energy-efficient technologies used or constructed by a business. The Internal Revenue Service (IRS) and the Department of Energy co-administer this program in an effort to encourage businesses to go green.

These are the eligible technologies for the ITC, including their rebate amount and expiration dates:

  • Solar (which includes photovoltaic, solar water heating, solar space heating/cooling and solar process heat) - The rebate amount is 30 percent until 2019. In 2020, it drops to 26 percent and in 2021, it drops to 22 percent. After 2021, the rebate amount is 10 percent.
  • Geothermal Electric - The rebate amount is 10 percent and does not have a set expiration date, as of now.
  • Large Wind - The rebate amount is 24 percent for 2017, 18 percent for 2018 and 12 percent for 2019.

The system must be completely installed and used for its intended purpose by the expiration date for all these technologies, except for the solar and wind. Their expiration dates depend on when construction starts. has more detailed information about the specific requirements of each eligible technology for the ITC. If your business is eligible, you must fill out Form 3468, Investment Credit. This form includes rehabilitation, energy and reforestation credits.

Qualified Plug-in Electric Drive Motor Vehicle Credit

This tax credit is available for qualified plug-in electric drive motor vehicles, which includes passenger vehicles and light trucks. According to the IRS, the total amount of credit allowed for a vehicle is limited to $7,500. Depending on the vehicle, the credit amount may vary, so be sure to check this list to see if your vehicle qualifies.

These are some general vehicle requirements in order to qualify for the tax credit:

  • Draws energy from a battery with at least 4-kilowatt hours and may be recharged from an external source.
  • Must be intended for use or lease, not resale.
  • Must be used mostly in the U.S.
  • Original use of the vehicle must commence with the taxpayer.

Also, keep in mind that there is a phase-out period for this tax credit. If a manufacturer sells at least 200,000 qualified vehicles, the tax credit will begin to phase out. For sales after December 31, 2009, the phase out is based on a cumulative basis. If your vehicle is eligible for the electric vehicle tax credit, you must fill out Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit.

Hopefully, you are able to use these tax credits for energy-efficiency to help your business this tax season. If you’re looking for other business tax credits available for small businesses, check out this list. The tax deadline is fast approaching, so here are some income tax tips to help you get organized.

Note: This information is general in nature. Please consult your tax advisor regarding your specific situation.

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