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Tax Incentives for Energy Efficiency Expenditures

July 17, 2013 By Brent Hardy

Brent Hardy

If saving energy is at the top of your company’s priority list, the federal government offers various tax incentives to ensure that you’ll also be saving money while taking environmentally sustainable steps.  Here are some federal tax credits to make the process of going green easier on your bottom line.

Business Energy Investment Tax Credit

Tax credits equal to a percentage of energy efficiency expenditures are available for new projects undergone by small businesses. Credits are offered for the following:

  • Solar Installations: Credits are equal to 30% of expenditures with no maximum credit. Keep in mind, solar pool heating systems and passive solar systems are not eligible.
  • Small Wind Turbines: These credits are also equal to 30% of expenditures with no maximum credit for turbines installed after December 31st 2008. Turbines with up to 100kW in capacity are eligible.
  • Geothermal Installations: Credits for Geothermal installations are equal to 10% of expenditures with no maximum credit.
  • Micro Turbines: Equal to 10% of expenditures with no maximum credit. This applies to Micro Turbines up to $200 per kW of capacity.
  • Fuel Cells: Equal to 30% of expenditures with no maximum credit, applying up to $1,500.00 per 0.5 kW of capacity.
  • Combined Heat and Power: Equal to 10% of expenditures with no listed credit limit, applying up to 50 MW of capacity exceeding 60% energy efficiency.

Businesses must have these improvements placed in service by the end of 2016 to be eligible for this tax credit.

Energy Efficient Commercial Buildings Tax Deduction

The Energy Policy Act of 2005 initialized tax deductions between $.30 and $1.80 per square foot for taking energy-reducing measures in commercial buildings. The Emergency Economic Stabilization Act of 2008 has since extended these deductions until the end of 2013.  The amount deducted depends on how much power is being saved and the technology being used.  Relevant areas of improvement include:

  • Equipment insulation
  • Lighting
  • Water Heaters
  • Central Air conditioners
  • Weather stripping/caulking
  • Tankless and heat-pump water heaters

The maximum deduction of $1.80 per square foot is for building owners whose improvements reduce the building’s energy cost by 50%, compared to a building that meets the minimum ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) requirements. Installations of the following are eligible for this deduction:

  • Interior lighting
  • Building Envelope
  • Heating Systems
  • Cooling Systems
  • Hot Water Systems
  • Ventilation Systems

A $.60 deduction per square foot is available if these installations meet target levels that would contribute to a 50% energy savings, if more systems were put in place. After the changes are made, the building must be certified as meeting the power-saving targets. These deductions are mainly for building owners, but tenants can be eligible if they are involved in the construction spending.

Commuting Tax Breaks

Your company can save an average of 10% on payroll taxes if your employees take mass transit or commute to work.  These payroll tax savings include SUI, SDI, FICA and city taxes for up to $100 a year for each participant. Employees can also use up to 230 tax-free dollars per month to save on commuting costs. If you purchase a company bike or your employees regularly bike to work you can spend $20 each month for bicycle purchase, repair and storage and defer 9.5% of your FICA contribution to the payment.

Company Vehicles

While many of the tax credits for standard hybrid and diesel cars no longer apply for vehicles purchased after 2010, there are still plenty for other energy-saving rides with credits your company can buy.

Plug-in hybrids

Up to a $7,500 tax credit is available for plug-in electric/hybrid vehicles purchased after 2010.  The Chevrolet Volt and the Fisker Karma Sedan both are eligible for this maximum credit, while the Ford C-Max Energi and Fusion Energi have a credit of $3,751.  The Honda Accord Plug-In Hybrid has a full credit of $3,626 while the Toyota Prius Plug-In Hybrid has one of $2,500.

Electric Vehicles

Electric cars bought after 2010 could be eligible for a credit of $7,500. Some of the cars included are the Ford Focus EV, the Fiat 500e and the Nissan Leaf.

Do you know of any other tax incentives for your company to save some green while going green?

Brent Hardy manages sustainability programs for Extra Space Storage. The Lake Elsinore self storage facility in California has been retrofitted to reduce energy consumption.



One comment on “Tax Incentives for Energy Efficiency Expenditures

  1. I’m trying to put together information on gov’t financial incentives for wastwater biogas use. Your article mentions incentives for micro turbines, fuel cells and CHP. Can you direct me to further info on these incentive programs. Web sites would work.

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