Cash in on energy tax incentives
In an effort to promote energy efficiency in the United States, several “green” energy tax credits and deductions have been extended through the American Taxpayer Relief Act of 2012. Now might be the time to make energy-efficient upgrades. The key to successfully cashing in on federal energy tax incentives is to be proactive about your tax planning. Here's how to make the most of going green:
1. Plan ahead
Make a list of the energy-related improvements you have made, or plan to make between now and the end of the year. In some cases, businesses simply miss out on significant opportunities because they aren't aware that the newly installed product (i.e., new lighting system) qualifies for an energy tax incentive.
Some energy incentives require you to obtain certification — a reporting process that must be performed by a responsible third party to meet Internal Revenue Service guidelines and might take at least a month to complete.
2. Review incentives
Review a comprehensive list of the current federal energy credits and deductions available. Check improvements made at your business to see if they qualify for energy credits or deductions:
- Deduction for reducing energy costs associated with new or renovated commercial buildings: Did you reduce energy costs associated with lighting, building envelope or heating/cooling/water heating equipment? The building must be certified by a qualified third party prior to preparing your tax return.
- Combined heat and power systems: Did you purchase a CHP system smaller than 50 megawatts? If so, you might qualify for a 10% tax credit on the first 15MW of CHP property.
- Commercial vehicles: Did you purchase hybrid vehicles for your business? You might qualify for tax credits depending upon the weight class of the vehicle, its fuel economy and its maximum available power.
- Onsite renewables: Solar and wind systems and geothermal heat pump systems might qualify your business for incentives of 30% of the installed cost of the system.
- Solar systems: If you installed solar energy equipment to generate electricity, heat/cool water to the building or illuminate the interior of your building, you might qualify for tax incentives.
- Small wind systems: Starting construction of a turbine to power your facility before Jan. 1, 2014 could reward you with a credit of 2.2 cents per kilowatt hour for the next 10 years.
- Geothermal systems: Qualified geothermal systems can get an investment tax credit or the option of taking a grant in lieu of the credit.
- Fuel cells and microturbines: Are you generating electricity through fuel cells or microturbines using a gas turbine engine? If you meet the requirements for efficiency, your business could qualify for credits of up to 30% of the cost.
- Alternative vehicle refueling property: If your company has refueling pumps, it might be time to upgrade. A credit for investing in alternative vehicle refueling property could lead to a tax credit of the lesser of $30,000 or 30% of the investment to install.
For a comprehensive list of the commercial energy credits and deductions and to learn more about the eligibility requirements for each program, visit energytaxincentives.org/business.
3. Get help
Notify your CPA if you plan to take advantage of energy tax incentives. By doing this well in advance of tax season, your CPA can help you identify whether a study or certification is required by the IRS in order to take advantage of the incentive and can help coordinate the process with a qualified third-party provider.
Robin Cyr, attorney and CPA, is a manager with Albin, Randall & Bennett and specializes in providing tax and consulting services. She can be reached at rcyr@arbcpa.com.
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