How Dwindling Tax Incentives for Green Energy will Impact your Business

May 1, 2013 by Ed Becker

Synopsis: The impact of expiring green energy tax incentives for small business and what to expect in the future.

As traditional fuel prices continue to climb, green energy tax incentives have failed to keep up with the pace. Over the past decade, tax breaks for solar, wind, and alternative fuels have made clean energy a viable solution for many small business owners.

Saying Goodbye to Green Tax Incentives in 2013

Unfortunately, the tax incentives for clean energy are rapidly disappearing as federal and state governments implement cost saving measures. Each tax credit discussed below is slated for expiration in 2013.

Alternative Fuel Vehicles

The plug-in electric vehicle tax credit is especially appealing to business owners who make frequent use of their vehicles. The American Taxpayer Relief Act (ATRA) has extended the tax credit for Plug-In electric vehicles through 2013, which allows business owners a 10% credit on qualified vehicles. A full list of eligible vehicles can be found on the IRS website.

How your tax bill will be impacted?

When used for business purposes, the plug-in electric vehicle credit can be carried back one year or carried forward up to 20 years. Because this tax credit is expiring in 2013, it is essential to act quickly if you intend on adding a plug-in vehicle to your fleet.

Energy Efficient Commercial Buildings

The owners of energy efficient commercial buildings are able to claim a tax deduction $1.80 per square foot. Eligibility for the full credit requires that your building meets a specific energy reduction target specified in the tax code. Major upgrades to a building’s interior lighting, HVAC system, and building envelope can be partially deducted at a rate of $0.30 per square foot. If you plan on making energy saving improvements to your existing structure, your business will be able to tax advantage of these tax savings through 12/31/2013.

Taking Advantage of State Tax Incentives

In many cases, the tax benefits offered in state are far more powerful than federal incentives. Business owners should attempt to combine federal and state tax breaks to obtain the highest percentage of savings. You may be surprised to find valuable state programs that can drastically cut your tax liability this year.

For example, the state of California offers a partial exemption of state sales and use tax for farm equipment when a agricultural solar facility is used. For qualified businesses, this program can wipe out 100% of the taxes levied by California, although local taxes will still apply.

Where can you find green tax incentives for your state?

Check out the Database of State Incentives for Renewables & Efficiency (DSIRE). This comprehensive resource contains a complete listing of clean energy tax incentives for all 50 states.