Take Credit for Energy Efficient Upgrades: A Smart Move for Your Small Business!

Joe Mardesich
Apr 18
2 min read

Energy efficient upgrades are more than just eco friendly they can lead to major savings and tax benefits. As a small business owner, making smart upgrades can lower your bills and reduce your tax burden. Here’s how you can take full advantage:

1. Upgrade to Energy-Efficient Equipment

Investing in LED lights, Energy Star appliances, smart thermostats, and high efficiency HVAC systems can cut down on electricity usage and long-term costs. These upgrades are not only practical but also often qualify for government incentives, making them a wise financial move.

2. Take Advantage of Section 179 Deduction

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and improvements during the year they're placed into service. If your energy efficient upgrades meet the criteria, you can deduct the entire cost providing immediate tax relief.

3. Explore the 179D Energy-Efficient Commercial Buildings Deduction

This deduction rewards commercial building owners who improve energy performance through lighting, HVAC, and building envelope upgrades. If your upgrades lead to significant energy savings, you may qualify for a deduction of up to $1.80 per square foot.

4. Install Renewable Energy Systems

Solar panels, wind energy systems, and other renewable energy installations can qualify for the Federal Investment Tax Credit (ITC). This credit allows you to recover a percentage of installation costs making clean energy more accessible and affordable for small businesses.

5. Check for State and Local Incentives

Besides federal programs, many states and municipalities offer additional rebates, tax credits, or grants for energy-efficient upgrades. These local incentives can often be combined with federal ones, helping you maximize your return on investment.

6. Maintain Accurate Financial Records

Proper bookkeeping is essential when claiming energy related tax benefits. Keep all invoices, installation contracts, and energy performance reports. Create a dedicated expense category in your accounting system labeled Energy Efficient Upgrades to simplify tracking and reporting.

7. Consult a Tax Professional

Tax laws related to energy incentives can be complex and change frequently. A qualified tax advisor can help you navigate available programs, ensure compliance, and make sure you don’t miss out on any potential savings.