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Help Your Business Save Money Through Energy Tax Credits

Small to medium-sized businesses can reduce overhead costs considerably by making strategic energy efficiency improvements. Clean energy tax credits reduce upfront investment costs, making these upgrades more accessible to businesses of all sizes and industries. Whether you’re a 4th generation family business, a major corporation, or just getting started, you can make a major difference to your bottom line this tax season by taking advantage of energy efficiency tax credits and financial incentives.

Understanding Energy Tax Credits

Taxes, in general, are an overwhelming endeavor for business owners. In the midst of preparing all of the documentation for tax season, business owners often forget about potential savings they could receive through tax credits. But what exactly are tax credits and who is eligible? Energy tax credits are governmental incentives that provide savings to businesses investing in alternative energy technologies and energy efficiency upgrades. Instead of providing instant discounts on these upgrades, the government offers to reduce your business’s taxes to reward conservation efforts. Energy tax credits are available at the federal, state, and local levels, each with their own eligibility requirements and specifications. Understanding the details and eligibility requirements for each of these incentives can help inform your business’s next efficiency upgrade.

Main Types of Energy Tax Credits

  • Business Energy Investment Tax Credit (ITC)
  • Energy-Efficient Commercial Buildings Deduction (Section 179D)
  • Research and Development
  • State and Local Energy Tax Credits

Exploring Department of Energy (DOE) Programs

The Department of Energy (DOE) was established in response to the 1970s Energy Crisis in an effort to reorganize the federal government to have more control and authority over the energy market and legislative energy policies. Today, the DOE stands as a champion of energy efficiency. Their educational resources, incentives, and efficiency programs encourage residents and businesses to adopt alternate energy technologies and conservation practices. Participation in DOE programs results in both cost savings and a reduced carbon footprint.

DOE Programs for Businesses

Energy Star Certification

Energy Star is a government-backed symbol of energy efficiency. Created in partnership with the U.S. Environmental Protection Agency (EPA), Energy Star certification identifies appliances, systems, and building materials that meet the EPA’s strict efficiency standards. Purchasing Energy Star products ensures minimal equipment operational costs, resulting in lower utility expenses. Beyond Energy Star certified products, businesses can achieve Energy Star Building Certification, recognizing businesses that champion energy conservation practices. On their website, you can find Energy Star’s tax credit guide and other rebate resources.

Energy Efficient Product Incentives

Along with Energy Star’s wide array of efficient products, business owners can benefit from using the Energy Star rebate finder. This tool allows you to find local and state rebate programs that offset some of the costs associated with upgrading to Energy Star appliances. Simply enter your business’s zip code to find available 2023 tax rebates for additional savings, making efficiency upgrades even more accessible.

Technical Assistance Programs

Finding proper educational resources and connecting with the right energy professionals can be an overwhelming task, but the DOE is committed to providing Technical Assistance Programs for businesses pursuing renewable energy or efficiency improvements. Their directory provides information for energy auditing, management systems, building efficiency, and overviews of alternative energy sources. 

Grants and Funding Opportunities

Beyond providing resources, the DOE also provides grants and financial support for energy efficiency and renewable energy projects. Their collection of rebates, tax credits, and savings programs are available to help make your business’s sustainability goals a reality.

Business Energy Investment Tax Credit (ITC)

Businesses interested in benefiting through on-site renewable energy installation should look into the Business Energy Investment Tax Credit (ITC.) The ITC is a tax credit that reduces a business’s federal income tax liability for a percentage of the cost of renewable energy installation. For projects that meet eligibility requirements, business owners can receive up to a 30% tax credit. Initially, this tax credit existed solely to offset commercial solar panel installation. It has since been revised through the Inflation Reduction Act of 2022, extending the deadline until 2033 and expanding eligibility to additional renewable energy technologies.

Qualifying Technologies for Business ITC

  • Solar Energy Systems
  • Wind Energy Systems
  • Geothermal Energy Systems
  • Fuel Cell Systems
  • Combined Heat and Power (CHP) Systems
  • Microgrid Controllers
  • Lithium-Ion Energy Storage

Energy-Efficient Commercial Buildings Deduction (IRC 179D)

Internal Revenue Code 179D (IRC 179D) is a federal commercial property tax deductible available to qualified commercial building owners who construct new energy-efficient buildings or those who retrofit their existing buildings to meet energy efficiency requirements. To qualify, business owners must adopt efficiency standards as determined by the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE.) Upgrades made to these systems must be expert-certified as part of a plan to reduce annual energy consumption by 25% or more . The value of IRC 179D is calculated by the square footage of the building. Building owners can expect savings of $0.50-$1.00 per square foot depending on the reduction of your annual energy consumption.

Qualifying Building Components for 179D Deduction

  • Interior Lighting Systems
  • Heating, Ventilation, and Air Conditioning (HVAC) Systems
  • Water Heating Systems
  • Building Envelope – Roof, Doors, Windows, and Insulation

Other Relevant Energy Tax Credits

Research and Development Tax Credit (Form 6765)

Research and Development, also called Research and Experimentation, tax credits are federal benefits that provide businesses cash savings for performing activities related to the development, design, or improvement of products, processes, formulas, or software.  This credit is available to a wide range of industries to help increase funding for research and development, hire additional employees, expand facilities and beyond.

Renewable Energy Production Tax Credit (PTC)

Companies that already have renewable energy technology installed could be eligible for the Renewable Energy Production Tax Credit (PTC). This credit lasts 10 years, providing businesses with a per kilowatt-hour (kWh) federal tax credit for renewable energy produced. Business owners can receive around 0.3¢ per kWh for the sale of electricity your renewable system generates, however it may vary depending on your specific system.

State and Local Energy Incentives

State and local government agencies also have unique incentives available to businesses pursuing energy conservation efforts. To find additional tax credits and financial incentives, business owners can review local small business tax deductions through the Database of State Incentives for Renewables and Efficiency (DSIRE).

Take Action Now for Greater Savings Next Tax Season

Seize the opportunity for greater savings next tax season by taking action today! The benefits of energy tax credits are far-reaching, serving to support your business’s sustainability goals while reducing operational expenses. Adopting renewable energy and green technologies is a forward-thinking way to address operational efficiency while building your business’s reputation as a champion of environmental conservation. As you embark on your next efficiency upgrade, remember the wide array of resources available to make your sustainability and efficiency goals a reality. For additional energy cost savings, consider contacting an Integrity Energy representative. As one of the largest commercial energy brokers in the country, we’re dedicated to finding cost-effective energy solutions tailored to your business’s unique needs.

Frequently Asked Questions

Q: What are energy tax credits?

A: Energy tax credits are financial incentives provided by the government to encourage the use of renewable energy sources and energy-efficient technologies, allowing businesses to offset their tax liabilities based on qualifying energy-related projects.

Q: What types of energy tax credits are available for businesses?

A: Businesses can apply for various energy tax credits ranging from renewable energy production, energy-efficient improvements, and alternative fuel vehicles to initiatives promoting energy conservation and sustainability.

Q: Are there grants and funding opportunities available through the Department of Energy?

A: Yes, the Department of Energy provides various grants and funding opportunities for research, development, and deployment of energy-related projects and technologies.

Q: How can I achieve Energy Star certification for my business?

A: To achieve Energy Star certification for your business, implement energy-efficient practices and technologies, conduct an energy audit to assess performance, and then apply for certification through the Energy Star program once you meet the required energy performance standards.

Q: How does the Business Energy Investment Tax Credit work, and what technologies qualify?

A: The Business Energy Investment Tax Credit (ITC) offers a credit based on investments in eligible energy projects, including solar, wind, geothermal, fuel cells, and other renewable energy systems, encouraging businesses to adopt these sustainable technologies.

Q: What is the Energy-Efficient Commercial Buildings Deduction?

A: The Energy-Efficient Commercial Buildings Deduction is a tax incentive allowing eligible businesses to claim deductions for investments in energy-efficient building systems and improvements that result in a reduction of energy consumption by 25% or more.

Q: Which building components qualify for the Section 179D deduction?

A: Building components that qualify for this tax credit include HVAC, interior lighting systems, water heating, and the building envelope which includes windows, doors, insulation, and roofing.

Q: Are energy tax credits subject to expiration?

A: Yes, energy tax credits often have expiration dates, as they are periodically reviewed. They may be extended, modified, or phased out based on government policies and legislation.

Q: How can I find energy consultants to assist with tax credit applications?

A: You can locate energy consultants specializing in tax credit applications by exploring industry directories, professional associations, or utilizing online platforms that list experienced consultants in the energy sector.

Q: What are the documentation requirements for energy tax credit claims?

A: Documentation requirements for energy tax credit claims typically include detailed records of expenses, proof of purchase, installation dates, certification of equipment meeting the energy-efficient criteria, and any other supporting documents mandated by the specific tax credit.

For additional answers to your questions about the energy industry and saving money through efficiency practices, please visit our general FAQ page.