Are you considering adding alternative energy property to help your business save money?
If so, we want to make you aware of a Federal income tax credit that is available to help offset the cost of qualifying energy efficient property. The business energy credit offers a certain percentage of your cost back in the form of a credit which can be used to offset income taxes your business may owe.
The types of energy saving equipment eligible for the credit are listed below. Qualifying property includes the following:
Equipment that uses solar energy to generate electricity, heat or cool (or provided hot water for use in) a structure or provides solar process heat (exceptions apply to swimming pool related equipment).
Equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight.
Equipment used to produce, distribute, or use energy derived from a geothermal deposit.
Qualified fuel cell or microturbine property.
Combined heat and power system property.
Qualified small wind energy property.
Equipment that used the ground or ground water as a thermal energy source to heat or cool a structure, or as a thermal energy sink to cool a structure (geothermal heat pump systems).
Waste energy recovery property.
For many of these properties, a credit equal to 26% of your cost is available for property constructed from 2020 to 2022. If you wait until 2023, the allowable credit goes down to 22% of your cost. For construction that begins in 2024, you may still be able to get a 10% credit, assuming the property is in service by the end of 2025.
In addition to the federal credit, many state and local governments offer incentives that can be tacked on as well and must be considered when deciding to pursue an alternative energy property acquisition.
As with all business expenditures, tax savings shouldn’t be the only motivation, but if energy efficient property is something your business is considering, then we would love the opportunity to sit down with you and help to ensure the expense makes good business sense.