Navigating Business Energy Tax Incentives

Have you ever considered going green but worried about the cost? Businesses can earn tax credits and other incentives for taking steps toward energy efficiency and sustainability, making green upgrades more financially appealing. Let's explore some available tax credits and how to claim them.

What types of tax incentives are available?

Energy tax incentives are financial rewards for businesses that adopt environmentally friendly practices. These credits reduce tax liability, making green investments more affordable. There are generally two types of incentives: tax credits and tax deductions.

A tax credit directly reduces the amount of tax you owe, dollar for dollar, while a tax deduction reduces the amount of your income that is taxable, potentially lowering the overall tax you pay.

Business energy tax incentives you should know about

Several tax credits and incentives are specifically designed to help businesses make energy-conscious choices. Here are some to consider.

• Federal investment tax credit (ITC): The ITC is a 30% tax credit that incentivizes investment in renewable energy projects, including solar, wind, energy storage systems and more. For example, businesses installing solar panel systems can receive a credit of up to 30% of the system's total cost.

• Electric vehicles (EVs) and charging infrastructure credits: The federal government offers up to $7,500 for each qualified EV purchased, depending on the vehicle's battery capacity as well as manufacturing considerations. You can also benefit from installing EV charging stations. The Alternative Fuel Vehicle Refueling Property Credit allows for a tax credit of 30% of the cost of purchasing and installing EV charging equipment.

• Green energy accelerated depreciation: Accelerated depreciation enables businesses to deduct the cost of certain energy-efficient assets faster than they actually depreciate. This IRS provision allows companies to write off up to 85% of green investments over multiple tax years, aiding in the affordability of upfront expenses like new solar panels.

• Energy-efficient commercial building tax deduction: Owners or lessees of commercial buildings can get this deduction by reducing their building's energy use by 50% or more in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1. The deduction equals up to $1.88 per square foot of building space for improvements to interior lighting, water heating and HVAC systems.

Your business may be eligible for more state or local financial incentives. For more information, search the DSIRE Database.

How to claim energy tax incentives

Claiming incentives can vary depending on the incentive and the agency overseeing them. Here are some general tips.

• Research available incentives for ones that your business may qualify for.
• Keep detailed records of all energy-related purchases, installations and improvements.
• Complete and file the appropriate forms through the Internal Revenue Service or other tax agency.

While navigating the business energy tax landscape can seem daunting, tax incentives can help your business enjoy the long-term financial benefits of energy efficiency and sustainability. If you are unsure about which incentives you may qualify for and how to complete the appropriate forms, contact a qualified tax professional. Are you ready to plan your 2025 energy efficiency projects and take advantage of energy tax incentives next year? Our TXU Energy Greenback rebate dollars can help fund new energy efficiency projects or offset the costs of existing ones. Contact your TXU Energy sales executive or email Business@txu.com to learn more.