ARTICLE | February 18th, 2025

Energy Efficient Tax Credits for Businesses

The Inflation Reduction Act (IRA) made several changes to the tax credits for businesses for expenses incurred for clean energy costs starting in 2023. Purchases that can qualify for a tax credit or incentive include qualified energy efficient vehicles, building components, and solar panels. For more information about which clean energy credit may apply to your business, contact your Larson Gross professional.

Commercial Vehicles

• Qualified commercial vehicle must have been acquired and placed in service after 1/1/23
• The credit is the lesser of:
  •  15% of vehicle’s cost basis, or
  • Incremental costs of vehicle over cost of a compara- ble vehicles powered solely by a gas or diesel engine
• Maximum credit = $7,500 (gvw <14,000 lbs) and up to $40,000 for heavier vehicles
• Only vehicles made by qualifying manufacturers who have written agreements to provide periodic reports to Congress can qualify

TIP: Make sure to understand what the credit will be with your dealer before purchasing the vehicle.

Commercial and Residential Buildings

Electric Vehicle (EV) Chargers
30% credit available for EV chargers placed in service after 1/1/23 in parking garages or lots in rural or low-income areas. Note prevailing wage and apprenticeship rules apply and it must be based in a low income or “rural area” as defined by the US Census Bureau

Home Builder Credit

• §45L for “contractors”. Both single-family and multi- unit homes can qualify (home builders, apartment developers)
• Increased credit if prevailing wage requirement is met but this requires an engineer’s
  report/study
• Energy efficient home credit extended through 2032 and ranges from $500 -$5,000 per unit depending on energy efficiency requirements the home satisfies

IMPORTANT: Certain requirements need to meet Energy Star certification for the credit. Please contact our office for more information early in the project life cycle, ideally in the planning phase, in order to be eligible for the credit

Energy Efficient Commercial Buildings §179

• Applies to the purchase of a new buildings OR deep energy retrofit of commercial buildings or large apartment buildings with qualifying interior lighting, HVAC, and hot water systems
• Provides for an immediate tax deduction for the amount of: Deduction = lesser of:
  • Cost of green portion of retrofit, or
  • Amount computed under complex efficiency energy standard
• Requires an engineer’s report/study
• Increases the maximum amount of deduction from $1.88 sq ft to possible $5.00 sq ft
• Increase in deduction if prevailing wage and appren- ticeship requirements are met

Other Provisions

• Solar and wind facilities located in low-income com- munities and Native American Lands
• Clean energy manufacturing and energy security credit for facilities producing clean energy and man- ufacturing of clean energy eligible components

Solar & Other Credit changes

Solar Credit starts at a base of 6% and can go up to 30% of qualified expenses. Rental properties may also qualify if laborers and mechanics installing the solar power projects are paid a prevailing wage and part of an electrical apprenticeship program

Credit is limited by tax liability but excess can be carried back or carried over

Eligible Solar costs include:

• Solar Panels
• Inverters
• Racking
• Balance-of-system equipment
• Sales & Use tax on equipment
• Installation costs and certain prorated indirect costs
• Step-up transformers, circuit breakers, and surge arrestors

Production Tax Credit – Extended electricity produced from certain renewable sources (solar/wind) extended, and now available to non-profits as a refundable credit

Stand-alone energy storage added as eligible for a potential 30% credit

Advanced manufacturing tax credit added for manufacturers of solar and wind and battery cell projects