Before the 2016 tax year is over, be sure to claim energy-efficiency tax credits for your small business if applicable. Tax credits can provide great savings by reducing the amount of income tax you owe. Unlike a tax deduction, a tax credit is a dollar-for-dollar reduction of the amount of income tax you have to pay. And, tax credits are typically created to reward and/or encourage businesses to build and invest in things that benefit the environment and economy—like using green technology.
Because of ever-changing markets and innovative technologies, it’s not guaranteed that energy-efficiency tax credits will always be available. So, it’s important for you to claim them now before they expire. Here are two tax credits you might want to consider for your energy-efficient business.
The Business Energy Investment Tax Credit (ITC) is a tax credit for eligible energy-efficient technologies used or constructed by a business. The Internal Revenue Service (IRS) and the Department of Energy co-administer this program in an effort to encourage businesses to go green.
These are the eligible technologies for the ITC, including their rebate amount and expiration dates:
The system must be completely installed and used for its intended purpose by the expiration date for all these technologies, except for the solar and wind. Their expiration dates depend on when construction starts. Energy.gov has more detailed information about the specific requirements of each eligible technology for the ITC. If your business is eligible, you must fill out Form 3468, Investment Credit. This form includes rehabilitation, energy and reforestation credits.
This tax credit is available for qualified plug-in electric drive motor vehicles, which includes passenger vehicles and light trucks. According to the IRS, the total amount of credit allowed for a vehicle is limited to $7,500. Depending on the vehicle, the credit amount may vary, so be sure to check this list to see if your vehicle qualifies.
These are some general vehicle requirements in order to qualify for the tax credit:
Also, keep in mind that there is a phase-out period for this tax credit. If a manufacturer sells at least 200,000 qualified vehicles, the tax credit will begin to phase out. For sales after December 31, 2009, the phase out is based on a cumulative basis. If your vehicle is eligible for the electric vehicle tax credit, you must fill out Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit.
Hopefully, you are able to use these tax credits for energy-efficiency to help your business this tax season. If you’re looking for other business tax credits available for small businesses, check out this list. The tax deadline is fast approaching, so here are some income tax tips to help you get organized.
Note: This information is general in nature. Please consult your tax advisor regarding your specific situation.