Within the past few years, the federal government has introduced or extended several tax credits to motivate property owners to reduce energy usage and use cleaner energy sources. If you own a business or commercial property, you may be able to use one of these credits to reduce your tax burden while increasing energy efficiency.
In this blog, we’ll explore the top solar tax credits for commercial properties:
- The Investment Tax Credit (ITC)
- The Production Tax Credit (PTC)
- Eligibility requirements
- State & local tax credits & rebates
We’ll also discuss why now is the best time to take your commercial property solar. Let’s get into it!
Ready to take your commercial property solar? Schedule a free estimate with Photon Brothers.
At Photon Brothers, we take the guesswork out of commercial solar installations. From your initial consultation to the day you power on, we’ll handle everything in-house and with the aid of expert solar engineers, project managers, and trained installers. To learn more about taking your commercial property solar, contact Contact us to schedule a free estimate. You can also check out our commercial case studies.
The Investment Tax Credit (ITC)
In 2006, the United States enacted the Solar Investment Tax Credit, better known as the ITC. Eligible business owners can claim a 30% credit for any solar system installed during the tax year. If you qualify for the ITC, you may also qualify for a 10% Domestic Content Production Bonus or a 10% Energy Community Bonus. The Domestic Content Production Bonus is for projects meeting certain wage and apprenticeship requirements, while the Energy Community Bonus is for projects using renewable energy or clean energy.
Originally, the ITC was supposed to expire in 2021, but Congress renewed it for another year. Thanks to the Inflation Reduction Act, the 30% credit has now been extended to at least 2025, making now the perfect time to complete a commercial solar project. We have a 25-year production warranty, giving you extra peace of mind as you work to capture solar energy and reduce your tax burden.
You may qualify for the ITC if your project has any of the following expenses:
- Energy storage devices with capacity ratings of at least 5 kilowatt hours
- Solar photovoltaic panels
- Installation costs
- Step-up transformers
- Surge arrestors
- Circuit breakers
- Approved equipment needed to provide solar process heat or generate electricity
The Production Tax Credit (PTC)
The Production Tax Credit gives eligible businesses a tax credit worth up to 2.75 cents per kilowatt hour of energy produced by solar and other eligible technologies. To earn the full commercial solar tax credit, your project must satisfy the prevailing wage requirements included in the Inflation Reduction Act. If your project doesn’t satisfy these labor rules, the credit drops to 0.55 cents per kilowatt hour.
You can’t claim the ITC and the PTC for the same project. However, you may be able to use both credits if you produce energy at one site and store it at another site. Photon Brothers proudly installs US-made products, giving you the high-quality equipment you need to reduce energy usage and qualify for as many energy-related tax credits as possible.
To claim the ITC or PTC commercial solar tax credit, you must meet the following requirements:
- Your project is located in the United States or one of its territories.
- You can’t lease your project site to a tax-exempt organization.
- You must use new and limited previously used equipment.
Since most business owners can’t use both credits, it’s important to choose a credit based on which one is likely to give you the biggest tax credit. Generally, businesses in sunny areas should opt for the PTC, as it’s a production-based credit. If your business operates in Phoenix, Albuquerque or another sun-drenched city, you may qualify for a much bigger credit with the PTC than you would with the ITC.
Conversely, businesses in Seattle, Miami, New Orleans, and other cities known for frequent precipitation are likely to make out better if they choose the ITC, which isn’t production-dependent. If you choose the ITC, you may qualify for the maximum credit even if you don’t produce as much solar energy as anticipated. The ITC is also a good choice for projects with high installation costs.
State & Local Tax Credits & Rebates
Several states also have tax credits and rebates available for commercial solar projects. For example, New Mexico has a Solar Market Development Tax Credit of up to $6,000 for business owners who install solar energy systems. Check with your state’s energy agency to determine if your business might qualify for any tax credits, rebates, or other incentives.
Your local chamber of commerce or state business development agency may offer additional research tools to help you uncover tax savings opportunities. If you identify another savings opportunity, you can rely on our team of licensed electricians to complete your project quickly without compromising safety. We also have a dedicated service department to offer ongoing support.
Reasons to Take Your Commercial Property Solar Now
Even if your project doesn’t qualify for a commercial solar tax credit, there are still plenty of reasons to start using solar energy for your business. In 2021, commercial enterprises paid an average of $650.04 per month for energy, or about $7,800 per year. Installing solar panels saves business owners up to 75% on their overall energy utility costs. If you’re currently spending $7,800 per year, that means you could slash your company’s utility costs to just $1,950 per year. That’s a savings of nearly $6,000.
Switching to solar also increases energy independence, leaving your business less vulnerable to changing market conditions. Oil prices have been spiking, making it much more expensive to operate businesses of all sizes. In Texas, the electrical grid is extremely vulnerable to freezing temperatures and other weather-related conditions, leaving some firms scrambling to keep their businesses running during lengthy power outages.
Finally, going solar gives business owners the opportunity to future-proof their operations. With the federal government offering so many incentives to reduce energy usage, it’s likely that we’ll be less reliant on fossil fuels in the near future. If you go solar now, you’ll be well-positioned to adapt to upcoming changes in the energy market.
Future proof your energy costs with a trusted solar installation from Photon Brothers.
Contact Photon Brothers at (720) 370‑3344 (Colorado) or (805) 351‑3371 (California) to schedule a free solar estimate. We offer 5‑star quality service and create custom solar panel designs to suit your unique property’s needs.
Visit our commercial case studies to see past projects we’ve completed, including projected 30-year energy savings. Or click below to schedule online today.