Going green for business tax incentives is an attractive option for many businesses. Not only are companies looking to care for the environment, but they can also receive valuable financial rewards in return. In this article, we will cover why governments value green practices and what you need to do to qualify your business for available incentives. We'll also discuss how Maximus can help you get started on your journey toward a greener future.
Understanding why governments value green practices
Many countries around the world have implemented laws and regulations that focus on protecting the environment with the goal of creating a sustainable future. These efforts have been recognized as having several benefits:
- Impact on Environment and Health - By reducing pollution and emissions, your business can have a positive impact on the environment and public health.
- Cost Savings from Resources Conservation and Efficiency - Going green can help your business save money by conserving resources and becoming more efficient in your operations.
- Increased Commitment to Sustainable Operations - Companies committed to going green show they care about the long-term sustainability of our planet.
Benefits of going green
Your business can enjoy a variety of benefits when you go green, ranging from improved profitability to increased operational efficiency. Some of the most important advantages include the following:
- Financial Incentives - Governments provide tax incentives to businesses that implement sustainable practices, such as the electric motor vehicles tax credit and biodiesel income tax credit. In addition, several studies have shown that businesses with greener operations tend to have lower operational costs.
- Improved Customer Loyalty - Customers are increasingly looking for businesses that demonstrate a commitment to sustainability.
- Better Public Relations - Engaging in green initiatives can help companies build a more positive public image.
Examples of green practices that qualify for incentives
Your company can take a variety of steps to qualify for incentives. The following are some of the most popular among American businesses:
Commercial clean vehicle credit
The federal government offers a tax credit of up to $7,500 per electric motor vehicle with a maximum total tax credit of $40,000. This tax credit can be used to offset the cost of purchasing or leasing an electric vehicle. To qualify, the vehicle must be powered by a battery with a capacity of at least 7 kilowatt hours if it weighs under 14,000 pounds and at least 15 kilowatt hours if it weighs 14,000 pounds or more.
Biodiesel income tax credit
The federal government also offers a taxable income credit of up to $1.00 per gallon for biodiesel fuels and mixtures of diesel fuel and biodiesel. This credit may be applied to the purchase of biodiesel used in a business's operations and is currently set to run until the end of 2024.
Energy-efficient commercial buildings tax deduction
Businesses and building owners may be eligible to receive a tax deduction of up to $1.88 per square foot towards the cost of making energy-efficient improvements to their buildings. This includes energy-efficient upgrades to HVAC systems, lighting fixtures, water systems, walls, windows, and roofing.
Also referred to as the 179D tax deduction, this tax break can provide you with a cheap way to drastically reduce your energy bill while taking into account the environment. Your business will need to have a certified energy auditor assess the property to qualify.
ENERGY STAR deductions and initiatives
ENERGY STAR is an energy efficiency program developed by the U.S. Environmental Protection Agency (EPA). The initiative's main focus is to reduce greenhouse gas emissions while also improving energy efficiency.
The ENERGY STAR program helps businesses install energy-efficient products and equipment, such as LED and fluorescent lighting. It also provides deductions for businesses that install ENERGYSTAR-rated appliances and equipment while demonstrating their improved energy efficiency. Through the initiative, your business can receive assistance in installing monitoring equipment for energy and water usage while also gaining access to free technical advice and resources.
Alternative Energy Tax Credits
The federal government offers several tax credits that encourage businesses to invest in renewable energy sources, such as solar, geothermal, and wind. Your business may be eligible for a tax credit of up to 26 percent of cost related to the installation of a solar energy system, fuel cells with a capacity of 0.5 kilowatts or more, and small-scale wind turbines with a capacity of 200 kilowatts and below. In addition, a tax credit of 10 percent is available towards costs relating to geothermal energy systems and microturbines 2 megawatts and under. It's important to note that some of these tax credits have maximum incentives. The maximum incentive for microturbines is $200 per kilowatt, fuel cells have a maximum incentive of $1500 per 0.5 kilowatts, but there is no maximum incentive for small-scale wind turbines.
Demonstrating Compliance to Claim Tax Incentives
To qualify for any of these incentives, your business must demonstrate compliance with each program's conditions. Each program has its own set of eligibility requirements, and documentation must typically be provided to claim the credit.
Documenting energy-saving initiatives and associated costs
To prove eligibility, your business should keep detailed records of any energy-saving initiatives and associated costs. This includes invoices for any monitoring equipment, as well as bills showing the savings gained from installing energy-efficient products and systems.
Keeping records of investment in green materials
Your business should also maintain records of all investments in green materials, such as LED lighting, water-saving fixtures, and solar panels. This includes invoices for any materials purchased, along with any additional fees or installation costs associated with the project. You should also keep track of tax credits or deductions your business has previously applied for and received.
Obtaining certifications from independent organizations
In many cases, certifications from independent organizations such as LEED (Leadership in Energy and Environmental Design), Energy Star, and Green Globes are required to qualify for certain tax incentives. Obtaining these certifications may require working with a third-party auditor specializing in energy efficiency, which can be expensive but worthwhile for businesses looking to reap the benefits of green initiatives.
Go green today, save money tomorrow
Going green can provide your business with a number of tax incentives that can help save money while also lowering its impact on the environment. Through programs such as 179D, ENERGY STAR, and alternative energy tax credits, you can reap the rewards of investing in green materials, installing energy-efficient products, and making other sustainable changes to their operations.
Maximus has helped numerous organizations successfully implement green initiatives, document their efforts, and demonstrate compliance with each program's requirements. By working with us, your company can gain access to the resources needed to put these incentives into effect and ensure they're compliant. This is a great opportunity for any business looking to reduce its environmental impact while getting some money back in the process. Some of these incentives may not be around forever, so don't wait — contact Maximus and start your green journey today.
