Commercial Clean Energy Credits: What Businesses Should Know
Commercial Clean Energy Credits: What Businesses Should Know
Blog Article
The transition to a clean energy economy is accelerating—and businesses are at the heart of it. From federal tax incentives to lower energy costs, investing in green infrastructure is no longer just a sustainability play—it's a bottom-line strategy.
Thanks to the commercial clean energy credit, the 25E clean vehicle credit, and the clean energy property deduction, companies now have powerful tools to fund their shift to renewable energy. These credits aren’t just for major corporations; they’re accessible to small and medium-sized enterprises, too.
This guide from Dakota Ridge Capital will help your business understand how to use these incentives, reduce operational costs, and prepare for a sustainable future.
What Is the Commercial Clean Energy Credit?
The commercial clean energy credit, primarily established under the revised Investment Tax Credit (ITC) provisions of the Inflation Reduction Act, rewards businesses that invest in clean energy technologies such as:
Commercial solar energy systems
Battery energy storage
Wind turbines
Fuel cells and microturbines
Geothermal systems
The base credit is 6%, but this increases to 30% if your project meets certain labor and sourcing standards, like prevailing wage and apprenticeship participation. You can further stack bonus credits by:
Building in low-income communities
Using domestically produced components
Developing small-scale projects under 5 MW
These credits can be claimed the year the clean energy property is placed in service, making the benefit nearly immediate.
The 25E Credit: Clean Vehicles for Commercial Use
The Section 25E Commercial Clean Vehicle Credit supports businesses switching to electric or hydrogen-powered fleets. It offers up to:
$7,500 for light-duty commercial electric vehicles
$40,000 for medium- and heavy-duty electric or hydrogen vehicles
Unlike consumer EV credits, the 25E credit has no manufacturer cap, no income limits, and can be used for an unlimited number of vehicles.
Use cases:
Electric delivery trucks for logistics companies
EV vans for field service providers
Hydrogen fuel cell buses for commercial fleets
As businesses face pressure to reduce emissions in transportation, the 25E credit presents an easy entry point with serious tax savings.
Clean Energy Property Deduction (Section 179D)
Section 179D offers a deduction of up to $5.00 per square foot for businesses making energy-efficient improvements to their buildings. This includes:
HVAC system upgrades
LED lighting with automation
Building envelope enhancements (roofing, windows, insulation)
To qualify, the upgrade must reduce the building’s energy consumption by at least 25%, compared to industry benchmarks. The larger the energy savings, the higher the deduction.
What’s new under the IRA? Tax-exempt entities—like schools, hospitals, and governments—can now allocate these deductions to the architects, engineers, and contractors who design qualifying systems.
Combining Credits with Accelerated Cost Recovery
One of the most effective strategies for businesses is to layer tax credits with depreciation deductions through the MACRS (Modified Accelerated Cost Recovery System).
Here’s how the combination works:
Claim up to 30% tax credit (commercial clean energy credit)
Depreciate remaining system cost over five years under MACRS
Utilize bonus depreciation—currently allowing 60% of eligible costs to be written off in year one (phasing down after 2026)
When you combine all three, a commercial solar installation costing $1 million could yield up to $600,000 in tax relief within the first year alone.
Which Businesses Are Eligible?
Eligibility is broader than many assume. If your business pays federal taxes and invests in qualifying clean energy or efficiency projects, you can likely benefit. Entities that qualify include:
Corporations (C-corps, S-corps)
Partnerships and LLCs
Sole proprietors
Nonprofits and schools (via elective pay provisions)
Government institutions (for 179D allocation to designers)
Elective pay is a key innovation introduced by the IRA—it allows tax-exempt entities to receive direct payment from the IRS in lieu of a nonrefundable tax credit. This levels the playing field for public sector participants.
Why Now Is the Time to Act
With commercial energy prices volatile and climate regulations tightening, there’s a clear window of opportunity. The incentives currently offered under the Inflation Reduction Act are not only generous but time-sensitive. Key reasons to invest now:
Reduce operating costs through lower utility bills
Protect against rising carbon compliance costs
Attract investors and stakeholders by demonstrating ESG leadership
Leverage enhanced credits before they begin to phase down
As federal funds roll out and clean energy markets expand, those who move first stand to gain the most.
How Dakota Ridge Capital Can Help
Navigating clean energy credits requires expertise across finance, energy systems, and tax regulation. At Dakota Ridge Capital, we provide full-spectrum advisory to help businesses:
Evaluate eligibility for credits and deductions
Structure financing to align with tax benefits
Facilitate partnerships with tax equity investors
Secure bonus credits through wage and domestic content compliance
Monitor ongoing compliance and reporting
We act as your long-term partner—ensuring your investment not only saves money but supports your broader sustainability goals.
Final Thoughts
The road to net-zero is paved with incentives—and your business can drive it profitably. From the commercial clean energy credit to the 25E credit and Section 179D deduction, clean energy is more affordable, accessible, and strategic than ever before.
Understanding how to leverage these benefits isn’t optional—it’s essential for future-ready businesses. Let Dakota Ridge Capital help you unlock the full financial and environmental return on your energy investments.
Ready to turn your sustainability goals into savings?
Contact Dakota Ridge Capital and discover how we can help you navigate clean energy tax credits with confidence.
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