Energy-Efficient Tax Credits: What You Need to Know (And Do) Before Year-End

As energy costs rise and environmental responsibility becomes more important, business owners have a unique opportunity to benefit from federal energy-efficient tax credits—while reducing operational expenses and contributing to a greener future.

The Inflation Reduction Act (IRA) of 2022 introduced and expanded a range of clean energy tax credits designed to encourage sustainability and reduce carbon emissions. These credits, which are available through 2032, offer significant savings for businesses that invest in energy-efficient upgrades or renewable energy systems. While the IRA is the legislation that created these opportunities, the IRS (Internal Revenue Service) is responsible for administering and overseeing how they’re claimed—making proper planning and compliance essential.

🌿 What Are the New Energy-Efficient Tax Credits?

Here are the key programs businesses should consider:

✅ 1. Section 179D – Energy Efficient Commercial Buildings Deduction

• What it is: Allows businesses to deduct the cost of energy-efficient improvements to lighting, HVAC, and building envelopes.

• Deduction amount: Up to $5.00 per square foot for qualifying energy reductions (as of 2023-2024).

• Who qualifies: Commercial building owners, tenants making improvements, and designers of public building projects.

Tip: This credit can be claimed annually for different buildings or upgrades. Consider accelerating planned retrofits before year-end.

✅ 2. Investment Tax Credit (ITC) for Solar, Wind, Geothermal

• What it is: A tax credit for the installation of renewable energy systems.

• Credit amount: 30% of the cost of solar, wind, or geothermal installations (possibly more for projects meeting "domestic content" or located in low-income areas).

• Who qualifies: For-profit businesses, nonprofits, and even certain governmental entities.

Tip: For 2025 planning, you may be eligible for "direct pay" or transferability—turning tax credits into cash even if you owe little to no tax.

✅ 3. EV Tax Credits for Commercial Vehicles (45W)

• What it is: A credit for purchasing electric or fuel-cell commercial vehicles.

• Credit amount: Up to $40,000 per vehicle, depending on vehicle size and battery capacity.

• Who qualifies: Businesses purchasing new electric trucks, vans, or delivery vehicles.

Tip: EV charging infrastructure may also qualify for separate credits under Section 30C—be sure to bundle your planning.

✅ 4. Energy Efficient Home Credit (45L)

• What it is: For contractors/builders of residential housing (multifamily or single-family).

• Credit amount: Up to $5,000 per home built to meet DOE Zero Energy Ready Home standards.

• Who qualifies: Residential builders, developers, and landlords.

🗓️ Smart Year-End Planning Strategies

Here’s how to take advantage of these credits before December 31st:

📌 1. Conduct an Energy Audit

Start with a professional assessment to identify where your property or processes are wasting energy. Audits can help justify Section 179D deductions and create a roadmap for improvements.

📌 2. Time Capital Improvements Strategically

If you're already planning HVAC, lighting, or building envelope upgrades, consider accelerating those projects into this tax year. The installation must be placed in service by year-end to qualify.

📌 3. Talk to Your Tax Professional

Many of these credits are complex, requiring documentation, certifications (like from a qualified engineer), or specific modeling. A CPA or tax advisor familiar with the IRA can help you plan proactively.

📌 4. Bundle Credits When Possible

Installing solar? Pair it with EV charging stations or other qualifying upgrades. Often, combining efforts enhances your overall savings.

📌 5. Plan for Direct Pay or Transferability (2024–2025)

Nonprofits and entities with low tax liability can benefit from "direct pay" (a cash refund from the IRS) or sell credits to a third party under new IRS rules.

📌 6. Check State and Utility Incentives

Federal tax credits are just the start. Many states, cities, and utility companies offer rebates, grants, and financing programs that can compound your savings.

Use resources like DSIREusa.org to find local programs.

🚀 The Bottom Line

Energy-efficient investments aren’t just good for the environment—they’re great for your bottom line. With the extended federal incentives available under the Inflation Reduction Act, businesses can offset up to 30–50% or more of energy improvement costs with tax credits.

But time is critical: to take advantage of many of these opportunities in 2025, action must be taken before December 31, 2025.

Need Help Navigating the Tax Maze?

Whether you're exploring solar, retrofitting a facility, or upgrading your fleet—working with a CPA who understands the updated tax landscape is key. Take action now to position your business for savings, sustainability, and success.

About the Author

Cherie Sayban is a certified public accountant. She has over 25+ years of experience in Finance, Accounting and Bookkeeping.  

​Cherie Sayban CPA provides various financial and accounting solutions to small and mid-size businesses. Our portfolio includes: tax preparation, payroll preparation, accounts receivable and payables, general ledger, and QuickBooks . Our bookkeeping workshops are offered both in-person and virtually.

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