Introduction:
In the pursuit of sustainable energy solutions, small business owners are discovering a powerful ally in the form of federal tax credits. At the forefront of this transformative journey is Eon Technologies, a dedicated provider of solar systems tailored for businesses. This article explores the significant advantages that small business owners can unlock through federal tax credits, shedding light on the expertise and guidance offered by Eon Technologies.
The 2 Primary Solar Tax Incentives
The federal government encourages the adoption of renewable energy systems through two key tax incentives – the Investment Tax Credit (ITC) under Section 48 and the Production Tax Credit (PTC) under Section 45.
- Investment Tax Credit (ITC):
- The ITC offers a 30% tax credit, reducing federal income tax liability for a percentage of the cost of a renewable energy and/or storage system installed during the tax year.
- The Investment Tax credit differs from depreciation in that it allows the business owners to claim a deduction immediately at the time of purchase, which isn't the case with depreciation.
- Production Tax Credit (PTC):
- The PTC provides a 2.75 cents per kilowatt-hour (kWh) tax credit for the electricity generated by solar and other qualifying technologies during the first 10 years of a system's operation.
- The PTC reduces the federal income tax liability of a business and is adjusted annually for inflation.
Both the ITC and the PTC credits are expended to decrease in the future; the ITC is scheduled to decrease to 22.5% in 2033 and the PTC will decrease to 2.00 cents per kWh in 2034. In addition, Federal tax credits have the potential to change frequently due to shifting economic and political factors. We always advise our customers to take advantage of the current tax incentives because they can easily change. Lastly, the increasing adoption of solar and its growing impact on Federal tax collections may accelerate changes to the generous incentives currently available.
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Are the ITC and PTC Applicable to Your Business?
In a bid to encourage widespread adoption of solar energy panels, the federal government has laid minimal prerequisites for businesses to avail of the Investment Tax Credit. To become eligible for the ITC or PTC, the solar panel system must:
- Be located in the United States or U.S territories
- Be new and use limited previously-used equipment
- Not be leased or owned by a tax-exempt entity such as schools, charitable institutions etc (though these exempt institutions are eligible to receive ITC in the form of a direct payment)
Conclusion
Understanding the complexities of tax credits can be daunting, but Eon Technologies excels in simplifying the process for small business owners. Our experts specialize in crafting tailored solutions that not only maximize the benefits of federal tax credits but also ensure compliance with relevant regulations. Get in touch with us today to explore how solar panel systems can work for you from a logistical, economic and environmental standpoint.