Many businesses are looking for ways to reduce their tax liability while also becoming more environmentally friendly. One option that may be worth exploring is the tax credits available for solar energy systems and batteries purchased and installed for use by businesses.
For those who invested in solar energy systems and/or purchased solar batteries during 2022, there is Federal Investment Tax Credit (ITC) available. It has been around for years and applies to businesses who purchased and installed solar energy systems.
This credit allows businesses to claim a credit equal to 26% of the cost of a solar energy system, including both the cost of the equipment and any associated labor and installation costs. For example, if a business spent $40,000 on a solar energy system, they would be able to claim a credit of $10,400 (26% of $40,000) on their 2022 tax return.
But in addition to the ITC for solar energy systems, there are also tax credits available for batteries purchased and installed for use by businesses. These credits, known as the Business Energy Investment Tax Credit (ITC-BE), can be used to offset the cost of batteries that store energy generated by solar panels or other renewable energy sources. The credit for batteries is equal to 10% of the cost of the batteries, with a maximum credit of $2,500 per battery system.
To qualify for the ITC and ITC-BE, businesses must be:
- Taxable entities.
- The solar energy system and batteries must be placed in service on or before December 31, 2022.
- It must be used to generate electricity for the business.
- It must be installed on the business’s property.
- It must be used primarily to generate electricity for the business’s own use, rather than for sale to others.
Furthermore, to claim the credit, businesses must file Form 3468, Investment Credit, with their 2022 tax return.
It is worth noting that there are some restrictions and limitations that apply to these tax credits. For example, if a business has received a grant or other incentives for their solar energy system or batteries, the amount of the credit may be reduced. As well, if a business has a tax liability less than the credit, the unused credit may be carried forward to future years.
In conclusion, the 2022 tax credits for solar energy systems and batteries purchased and installed for use by businesses can provide a significant savings for businesses looking to reduce their tax liability while also investing in renewable energy. Consult with a tax advisor to ensure you are making the most of these credits, and familiarize yourself with the rules and regulations that apply to ensure your business is eligible to claim the credit on your 2022 tax return.