Solar energy systems are a long-term investment for businesses that want to save money on their overhead costs, as well as take advantage of the benefits of clean energy. You can reinvest this extra money in the business in whatever way is most pertinent to you. Taking the solar energy tax credit for businesses is also the best way to shorten your ROI timeframe.
However, business owners need to know which incentives are available, how to take advantage of them, and which are dwindling. Read on to get the facts regarding tax credits and how much your business could save.
Which Tax Credits Are Available for Businesses?
If your business will have a tax liability at the end of the fiscal year, you want to have as many tax credits as possible. Installing a solar energy system is a simple way to reduce your out-of-pocket expenses. It comes with a 30% investment tax credit (ITC) as part of the Inflation Reduction Act, a 4% increase from the previous 26%, making it more lucrative than ever to get sustainable energy for an affordable cost.
Eligibility requirements for claiming the ITC are relatively simple: you must have a location based in the United States, pay income taxes, and have tax liability.
The solar energy tax credit for businesses is limited to those who own their own solar energy system. This means systems installed under a power purchase agreement do not qualify for the tax credit. You will need to finance or purchase the solar energy system outright to claim the credit.
Manage Tax Credits
Before making plans for your solar energy tax credit for businesses, you need to know how the credit will apply to your taxes. The ITC is issued against the liability on your tax returns at the end of the year. If your business does not owe enough to use the full tax credit available to it, you can roll over some of the money to the following year.
Keep in mind that this is not a refundable tax credit. Installation of a solar energy system does not mean that you will get your money back at the end of the year. It only offsets what you owe to the government at the end of your fiscal year. The tax credit is only available if you owe something to the government.
Tax Credits Enhance ROI Timeframe
If your business has tax liability to offset the ITC, your company will see that 30% reduction in the cost of its solar energy system. How does this benefit your business? First, your solar energy system will turn ROI much faster, enabling the company to cut overhead expenses.
Businesses still need to make the initial investment in the system, but strategic financing options make this more feasible. A functional system also offsets costs when it comes to overhead.
Solar energy systems provide a monthly ROI by offsetting electricity costs. They also enable businesses to avoid spontaneous rate hikes from utility companies to increase their own bottom line. The ITC enables businesses to see returns much faster.
How much can your business save on energy costs with a solar energy system? Consider the case study of the Wilshire Grand Hotel, which had high energy usage. After installing an 874.560-kW system, the hotel now offsets up to 95% or more of its energy costs.
Imagine what your business could do with all the money that you will save on utility costs!
Turn ROI Faster and Grow Your Business
Tax credits like the ITC can make a solar energy system more affordable for your business and lower the overall cost of clean energy implementation. You can use the one-time credit from your ITC on a business need instead of overhead. Whether you need more staffing, new programs, or better equipment, you will have the funds to spend how you see fit, leading to greater profitability. It all starts with installing solar energy.
At Geoscape Solar, we help businesses utilize solar energy for profit. Your business will become energy independent, be able to decrease utility costs, and leverage available solar incentives for a quick ROI.
To discover how installing solar energy on your property will increase your business profitability, contact one of our energy specialists!