How Green Tax Credits Work

Green Tax Incentives for Businesses

Individuals and their families aren't the only ones who can save some money come tax time by going green. Like the Renewable Energy Tax Credit, the Business Energy Investment Tax Credit allows companies to shave some of the associated costs after investing in making their properties more energy-efficient. That includes the installation of systems like solar power, small wind turbines, fuel cells, microturbines and combined heat and power (CHP). (CHP uses a single fuel source, like natural gas, coal or oil, to produce electricity and heat simultaneously.) The business energy credit is available for systems and improvements put in place before Dec. 31, 2016 [source: Department of Energy].

The credit is generally 30 percent of the expenditures related to an eligible improvement. It has no maximum when applied to systems like solar power and wind turbines. The credit for fuel cells tops out at $1,500 per 0.5 kWs, making it three times the size of the same credit for individual homeowners under the RETC. For geothermal systems, microturbines and CHP systems, the credit is 10 percent of costs. Microturbine credits are capped at $200 per kW of capacity [sources: Department of Energy, Environmental Protection Agency].

Businesses also saw a number of significant tax breaks fall by the wayside when the ARRA expired. Among them were programs allowing companies to use tax credit bonds to finance facilities that generate electricity from renewable sources, and to pay for various conservation programs, like the reduction of greenhouse gases. The law also extended a credit for businesses that create various types of renewable energy, as well as those who own property used for refueling alternative fuel vehicles [source: Department of Energy].

Of course, there's one thing that separates many businesses from us ordinary folks: money. All that cash means companies that saw significant savings from green tax credits can spend some dough on lobbying lawmakers to bring these and other incentives back.

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