What Tax Deductions Are Available for Eco-Friendly Businesses?

Is your business considering going solar? Want to save money on your business power bills? You can be environmentally savvy and save on costs, and still get a tax credit off your business taxes for these projects. And you can have a more energy-efficient business building and also get a tax deduction for your expenses.

You may be surprised to know that as a business owner, you are qualified to claim tax credits for all your business-related activities that promote a greener environment. Whether it’s procuring a fleet of electric vehicles for your business or installing energy efficient equipment in your office, you can claim a tax credit for all such eco-friendly initiatives. Let’s take a look at three major tax breaks you can claim for running an eco-savvy business.

Charitable donations

Did you know that businesses are eligible for claiming a tax deduction for donating electronic items and computers to charitable organizations? Businesses that donate in kind can take a tax deduction that is equal to the fair market value of the donated items. Let’s say if you make a non-cash contribution and the value of the items is less than $500, you can value the donation on your own. All you need to do is keep a note of the description and condition of the donated item. If the value of the donated items is more than $500, you must fill out Form 8283 (Noncash Charitable Contributions). Besides electronic goods and computers, businesses may also donate property to a charitable organization. If the value of the property is more than $5,000, businesses must engage an appraiser to get a written appraisal of the property’s value.

Energy efficiency improvements

As a leaseholder or commercial property owner, you can claim an energy tax deduction for a greener office. While installing energy-saving tools may seem like a big investment, the benefits you reap in the long run will easily outweigh the costs you incur. The deduction can save you around $1.80 per square foot of your office area, provided you can show that your office saves at least 50 percent energy and power costs as compared to ASHRAE Standard 90.1-2007. These deductions are typically claimed in the following three areas: heating and cooling systems, lighting, or the building envelope. You can also claim partial deductions of up to $0.60 per square foot if your business has taken measures to curb energy waste in just one or two of these areas.

Plug-in vehicles

If you buy eco-friendly vehicles for your business, you are eligible for federal and state government tax credits. For example, the federal tax credit for purchasing a plug-in electric vehicle (also known as EV or electric car) is anywhere between $2,500 and $7,500. The tax credit varies depending on the size of the vehicle and its battery capacity.  You can claim the credit by filling out Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit. Note that these deductions are only available until the manufacturer sells 200,000 units, at which point the deductions will begin to phase out.

Work from home? You are eligible too

If you are using your home, or a part of it, as your office space, you can claim tax deductions for the energy efficiency improvements you make in that space. Typically, the tax credit one can claim is around 10 percent of the amount spent on those improvements. Some of the improvements that you can make include installing high-efficiency heating and air conditioning systems, opting for energy efficient exterior windows, and adding insulation.

Across the United States, businesses are becoming more environmentally conscious and federal and state governments are working to encourage the change. Tax incentives in the form of deductions and credits exist to encourage business owners; however, many of these incentives relate to office practices such as waste disposal and recycling rather than to actual equipment, or to installing renewable energy sources to power the equipment.

Going green not only helps you save money, but it also gives you the satisfaction of contributing to society. So what are you waiting for? If you haven’t taken initiative already, take it now!

References:

https://www.usnews.com/news/energy/slideshows/tax-incentives-for-going-green

http://smallbusiness.chron.com/business-owners-tax-writeoffs-going-green-office-equipment-31688.html

https://www.computerworld.com/article/2550457/data-center/get-tax-breaks-for-going-green.html