Energy Tax Credits & Other Tax Deductions for Small Businesses
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Energy Tax Credits & Other Tax Deductions for Small Businesses

Energy Tax Credits

What Is An Energy Tax Credit?

An Energy Tax Credit, unlike a deduction, is a direct discount (aka credit) on a qualified amount applied against your gross income. A tax deduction is only applied after your gross income is determined and isn’t nearly as immediate as a tax credit.

If you are a small business, you’re probably already used to looking for applicable tax deductions. However, you may not have thought about all of the available Energy Tax Credits for which you might be eligible.

These tax credits and incentives do more than a simple end-of-the-year tax break, as they also save in energy costs and consumption in the long run and reduce your carbon footprint.

Don’t miss out on saving money and the environment. Check out all of these Energy Tax Credits and other Small Business Tax Deductions.

Qualifying for Energy Tax Credits

Almost every Energy Tax Credit has their own set of regulations, stipulations, and form to fill out. In addition, you will need to fill out a General Business Form (Form 3800).

Energy Tax Credits are available for a small business if and only if they follow one of the following provisions:

  • The equipment used by the small business utilize solar energy for the process of generating electricity, air conditioning (heating & cooling),  hot water, or solar process heat.
  • The small business uses the equipment in the production or distribution of geothermal energy, stored via water/stream or rocks.
  • The small business property is eligible for depreciation treatment, amortization, and that the property is, in fact, explicitly used in the course of business

There are also several technologies that, if used by a small business, could be eligible for Energy Tax Credits.

  • Solar technology
  • Wind turbines
  • Geothermal systems
  • Fuel cells
  • Microturbines
  • C.H.P. (Combined Heat & Power)

Energy Tax Credits for Small Businesses

Here are a few of the most beneficial energy tax credits for small businesses in 2018.

  • Alcohol Fuels Credit – Available to those small businesses who produce (not consume) alcohol-based fuels, i.e., ethanol and methanol.
  • Alternative Motor Vehicle Credit – Small businesses who purchase alternative-fuel-source vehicles to use solely as company vehicles can receive up to $8,000 in credit. This credit does not include hybrid or electric vehicles but does include hydrogen fuel-cell technology vehicles.
  • Rehabilitation, Energy and Reforestation Investments Credit – If a small business is renovating, restoring, or re-constructing something and chooses to use environmentally-friendly resources, they can receive a tax credit of up to 10% of the initial investment.
  • Energy Efficient Commercial Building Tax Credit – Owners & Lessees of commercial buildings are granted this energy tax credit when they install high-efficiency lighting, high-energy hot water systems, HVAC systems, or other energy-efficient components. If these installations reduce energy/power costs by at least 50%, you can deduct up to $1.80 per square foot.
  • Solar Investment Tax Credit – If a small business develops, finances, and installs a solar energy property, which is considered an On-Site Renewable Tax Incentive, they could receive a tax credit of up to 30% of the total cost of the system. It must, however, meet specific criteria.

Other Small Business Tax Deductions

Here are several other general small business tax deductions. Keep in mind, these are for business-related expenses only, and each one has their own set of provisions that small businesses must meet in order to receive the tax deductions.

  • Salaries & Wages
  • Employee Benefits
  • Professional Services
  • Independent Contractors
  • Freelancers
  • Commissions
  • Client/Employee Entertainment
  • Employer/Employee Education
  • Child-Care Assitance
  • Work-Opportunity Employees
  • Office Supplies/Expenses
  • Office Furniture/Equipment
  • Tools
  • Machinery/Equipment Rental
  • Service-Based Business Inventory
  • Computer Software/Hardware
  • Marketing/Advertising
  • Utilities
  • Office Cleaning/Janitorial Services
  • Vehicle Expenses
  • Travel Expenses
  • Moving Expenses
  • Home Office
  • Business Location Rent
  • Mortgage Interest
  • Loan Interest
  • Insurance
  • Bank Charges
  • Bonus Depreciation
  • Start-up Expenses
  • Other Taxes
  • Charitable Donations
  • Licenses & Trademarks
  • Intellectual Properties
  • Renovations
  • Previous-Year Carryovers
  • Unpaid Goods
  • Disaster Losses
  • Theft Losses
  • Bad Debts

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