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2018 Tax Credits for Green Energy

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It’s tax season. That means you’re probably thinking about the credits you’ll score this year – and what you may be eligible for next year. With changes to federal taxes going into effect in 2018, some of the rules are changing. 

Here’s an overview of green energy credits available in 2018. If you want to cash in on renewable energy efforts next year, now’s the time to start.

Solar Tax Credit

Solar arrays have been a popular way to score tax credits for the past several years. Now through at least 2019, businesses and homeowners can deduct solar array installation costs from federal taxes. With no limits on the credit, that’s an average savings of over $5,000.1  

Ten states – Arizona, Hawaii, Maryland, Massachusetts, Montana, New York, Oregon, South Carolina, Utah and Vermont – also offer their own tax credits for solar installations.2  And California excludes up to 100 percent of the value of solar energy systems from the cost of your property taxes each year, as long as it was installed between 2009 and 2016.

In addition to those savings, generating your own energy can lower your costs, too. Depending on how much you generate and store, your electric usage – and monthly bill – can go down. Plus, if you generate more electricity than you need, you can sell it back to the utility in certain states, creating an additional revenue stream.

Geothermal Tax Credit

Geothermal equipment captures heat energy as it escapes from the earth, and repurposes it to generate power in your business. You can claim a 10 percent federal tax deduction on certain kinds of this renewable energy generation equipment, including heat pumps. If you’re not ready for the investment in 2018, you may be in luck, as this tax credit as no expiration date.

Iowa, Montana, New Mexico, Oregon, Utah and Vermont also offer credits for geothermal energy installations.

Fuel Cells Tax Credit

Fuel cells convert the chemical energy from fuel into electricity. You can claim 30 percent of your expenditures and up to $1,500 per 0.5 kilowatt of capacity on your federal taxes. 

CHP Tax Credit

Combined Heat and Power, or CHP, is a cogeneration solution that converts gas into heat and electricity. This kind of efficient onsite generation can help you save energy and reduce your carbon footprint. Plus, you can claim a federal tax credit of 10 percent of expenditures. 

Small Turbine Credit

Interested in generating your own energy by harnessing wind power? You may be eligible to receive a federal credit for 30 percent of expenditures, as long as your equipment meets certain performance standards.

Hawaii, Maryland, Massachusetts, Montana, Oregon, Utah and Vermont also offer tax credits for wind energy installations.

Microturbine Credit

Microturbines work similarly to jet engines, except that instead of producing thrust, they generate electricity. They can run on a variety of fuels, including methane gas from landfills, known as “green waste.” Investing in a microturbine can earn you back up to 10 percent of expenditures on federal taxes.

Electric Vehicle Credit

Are you planning to purchase vehicles for your company this year? If so, it's worth taking a careful look at the energy-friendly options on the market. While federal tax credits for hybrid vehicle purchases expired, you may claim electric vehicles and bring in between $2,500 and $7,500. 

There may also be state and local incentives for fuel-efficient and electric vehicles, so take a close look before you make a decision.

State Sales Tax Exemptions

Depending on where your business is located, you may be exempt from sales taxes on certain green energy purchases. For example, Washington doesn’t tax your green energy generation equipment purchases, whether you choose solar, wind, or geothermal. Other states offer tax-free holidays for the purchase of Energy Star certified equipment.3  If you need new equipment anyway, choosing one of those dates to do your shopping can substantially decrease costs.

With or without tax credits and savings, choosing green energy options is a great way to save over the long term and reduce your carbon footprint. We recommend working with tax preparation professionals or financial advisors to discover all of the incentives available to your business in your area. 

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Posted: March 14, 2018