This can be a tricky time when it comes to tax breaks related to green energy. There is much speculation as to where the tax code is going, and what breaks will remain at the end of 2017. However, there are still one or two items that you can capitalize on now, and a few to keep an eye on for the future.
A good place to start is the Energy Investment Tax Credit. Also called the “Solar Tax Credit,” this credit is one of the more straightforward ways to go solar, and decreases the tax burden on your business. This credit is equal to 30 percent of the expenditures required to install a solar energy system–with no cap on maximum credit. This means that you can opt for top of the line solar energy systems without fear that the tax credit will leave you high and dry.
This tax credit applies to all systems that begin construction before December 31st 2023. However, it is important to note that the value of this credit decreases the closer you get to 2023. For instance: on January 1st 2020, the highest tax credit receivable is 26 percent. To get the 30 percent rate, construction has to begin before the end of 2019.
For a more comprehensive break, businesses have been relying on the infamous 179D tax break for years. 179D is lauded as the holy grail of green building tax deductions. This program provides $1.80 in tax breaks per foot of a commercial building that save at least 50 percent of the heating and cooling energy of a system, according to the Department of Energy. Additionally, you can save 60 cents per square foot for systems affecting the building envelope, as well as lighting.
This bill was extended in 2016 to apply retroactively to systems beginning construction in 2015 and earlier. However, there has been little news on the future of the break as we move into 2017. Many are hopeful that 179D will be extended (and even increased) soon, but this is largely speculation. This has traditionally been used as a huge tax break for sustainable commercial buildings, so it will be important to keep an eye on this policy this year.
This year, it may be best to focus on systems-specific tax breaks. For instance, installing a biomass stove can earn you a $300 federal tax credit, provided it has an energy efficiency rating of 75 percent or better. Certain central air conditioning systems also qualify for a $300 tax credit. Even some non-solar water heaters that have efficiency ratings of over 90 percent qualify for a $300 tax break. If you maximize your usage of all these individual incentives, that’s already a total of $900 saved come tax day…no matter what happens in terms of large-scale energy policy.
The takeaway here is to be specific. Understanding how to maximize the efficiency of your existing building–or install the right systems if you’re due for an upgrade–will make a world of a difference. Creating an environmentally sustainable building is a reward in itself, but that doesn’t mean that you can’t be compensated for it. Inevitably, your building will require maintenance, why not let the tax code inform those decisions to help increase efficiency and put some cash back in your pocket?
For more information on how to use the green tax code to your advantage, visit our website. To get a personalized opinion on how you can maximize your savings and efficiency, contact us.
