With tax season approaching, there’s a lot businesses need to do to get ready for filing. There are many tax incentives out there for businesses to claim, especially those dabbling in solar power. Those businesses that do have some investment in solar energy may wonder, “Does the solar tax credit apply to commercial buildings?” Here’s the information you’ve wanted to know about the solar tax credit for your business.
What Is the Solar Tax Credit?
The solar tax credit is an incentive given to residents and businesses that utilize solar power. The tax credit is meant to entice and encourage households and businesses to use more energy from the sun to help conserve the environment and save more on electricity.
What Does the Solar Tax Credit Mean for Commercial Property Owners?
What does using more energy from the sun and saving with a tax credit mean for commercial property owners? First, this benefit gives businesses a dollar-for-dollar credit toward income taxes. This is money you can claim, so it doesn’t go to the federal government. All in all, any tax incentive you don’t claim goes directly to the federal government.
The solar energy tax credit could satisfy costs like installation and energy storage systems when claimed. This is an incredible opportunity for businesses to embark on so they can save more on other costs that might have set them back after installing solar panels. Read on to learn how to claim your solar tax credit.
How Businesses Can Claim the Solar Tax Credit
Like homeowners, businesses need to meet specific requirements before claiming this credit. If you’re unsure if you are qualified, we have a list of qualifications below, and you could even ask your tax preparer about the qualifications for a more in-depth overview.
Qualifications
Who exactly is eligible for this credit, and how many times could you claim it? To answer the second half of this question, it’s the same for homeowners as it is for commercial properties: you can only claim this credit once based on how many properties you own. For example, if you own two properties in separate locations, you can claim the credit if it hasn’t been claimed years prior, and you own both properties.
You can quickly check for your eligibility by doing one of two things:
- A physical work test determines how much the property owner puts into physical work. The taxpayer doesn’t necessarily need to do the physical labor test; a contractor or subcontractor could do it. If a contractor or subcontractor entirely did the work, there needs to be proof of a binding contract stating the start date of the physical work.
- The second test is the safe harbor clause. Similar to a private residence, this clause states the project’s start date. If you completed your project by the end of the year, you qualify for the credit the following year; if you finished your project after the end of the year, you must wait until the following year.
There are other things to look over when determining eligibility for the solar tax credit. Here is what businesses need to know about qualifications for solar tax incentives:
- Equipment currently being used must be new or has had previously limited use.
- You cannot use solar energy to heat a pool or other frivolous devices.
- Your business must be in the US or on US territory.
- Your business must be paying the federal government for taxes in US currency.
Work with your tax filer to ensure that you meet these requirements. If you don’t meet these qualifications, you cannot claim the credit. However, there are ways to improve your eligibility, such as switching how you use your solar energy and moving your company to a US state or territory.
Applying
Even if you are still unsure, it does not hurt to apply. Applying won’t harm you; it’ll inform you about your eligibility. You can easily apply for this tax credit by completing form 3468 through the IRS. Make sure to look at the IRS’s website for information on how to complete and submit the form. If anything is missing or not submitted correctly, it will result in an “incomplete” status on your application.
The Benefits of Claiming a Commercial Solar Tax Credit
What are the benefits of claiming the solar tax credit? Businesses have so much to benefit from the solar tax incentive. When you claim the solar credit, you can save more on your business’s energy costs. Ideally, you’d appreciate this perk even more: you cut utility bills down. That is the best freedom to have when running your business.
Once you have claimed the solar tax credit, you can enjoy claiming benefits like saving more if you have charged your solar energy storage at least 75% of the time. As a bonus benefit, you could possibly gain tax equity financing if your project doesn’t have liability.
There is so much to enjoy with this tax incentive. Business owners everywhere should take full advantage to continue saving more on their solar energy usage.
Start Saving More With the Solar Tax Credit for Your Commercial Building
One of the great things you can do for your company right now is install solar panels and claim the tax credit. Now that you know a little more about the solar tax credit for commercial building owners, let’s get started on turning your project into a reality.
You can save a lot of money by investing in solar energy and claiming the tax credit. What other things can the tax benefit do for you? It allows you to get a bigger return on your investment. Additionally, solar panels can help safeguard you by providing advantages like bigger payback in three to four years, which is a big way to save more on future electric bills.
Go Solar Power is an award-winning company providing business owners the chance to invest in solar energy. Ditch the traditional electric grid for solar energy. You’ll be able to enjoy lower costs and risk-free financing for your solar panel system. Let’s talk about installing commercial solar systems for your business and how you can benefit from the solar tax credit.
