Increase Cash Flow and Maximize Your Tax Savings
Investing in energy efficiency and renewable energy can lead to significant opportunities.
Find out how to claim renewable energy and energy efficiency tax credits and deductions.
Maximize Energy Efficiency Tax Credits and Deductions
The Inflation Reduction Act (IRA) has incentivized the climate economy and boosted clean energy investments. By lowering the financial burden and making it more economically viable to invest in renewable energy solutions, renewable tax credits like Section 48 can help organizations accelerate their return on investment and meet sustainability goals. Additionally, properties that meet energy efficiency standards may qualify for 179D tax deductions or 45L tax credits. Our advisors can help you maximize the tax benefit of investing in clean energy and energy efficiency.
Clean Energy Investment Credit (Section 48)
Incentive for installing solar, wind, geothermal, fuel cell, energy storage, biogas, microgrid controllers and combined heat and power energy property
New Energy Efficient Home Credit (Section 45L)
Incentive for newly constructed or substantially renovated low-rise multifamily and single-family homes that utilize energy efficient building components
Energy Efficient Commercial Buildings Deduction (Section 179D)
Incentive rewarding the building and renovation of energy-efficient projects
Section 48
Section 48 provides a 26% credit for clean energy projects with construction beginning after December 31, 2019, and placed in service before January 1, 2022. For projects beginning construction after December 31, 2021 (or January 1, 2025, for property using fiber-optic distributed sunlight) and before January 1, 2033, Section 48 provides a credit between 6% and 70%. This credit begins to phase out through December 31, 2034.
Section 45L Tax Credit
45L provides a tax credit of up to $2,000 for each qualified energy efficient residential dwelling unit placed in service prior to 1/1/2023, and up to $5,000 per unit for projects placed in service between 12/31/2022 and 1/1/2033.
>>> We worked with a townhome complex owner to obtain the 45L tax credit. The complex was comprised of 56 units and included energy-efficient mechanical systems and building envelopes. By gathering the necessary information and completing the certification, the client received over $112,000 in credits on their current-year tax return (56 units x $2,000/unit).
Section 179D Tax Deduction
179D allows for a deduction of up to $1.88 per square foot for properties placed in service before 1/1/2023 and up to $5.00 per square foot for projects placed in service between January 1, 2023, and December 31, 2032. This deduction is indexed to inflation, so projects completed in 2023 can earn up to $5.36 per square foot, or $5.65 for projects completed in 2024.
>>> We worked with a manufacturing company whose facility underwent a 183,000 square foot expansion, including installing energy-efficient HVAC and lighting. By gathering the necessary information and completing the certification, the client received over $325,000 in deductions on their current year tax return.
Maximize Your Tax Savings
Our advisors can help you maximize the benefit of energy efficiency incentives.
Eide Bailly is the #1 accounting firm for energy efficiency tax incentives with Professional Engineers (licensed in all 50 states), modelers, tax attorneys, and CPAs all in-house, and we’ve helped our clients realize millions of dollars in tax savings annually.
