Power Your Small Business with Energy Tax Credits, Incentives, and More

Power Your Small Business with Energy Tax Credits, Incentives, and More

Last updated on February 20th, 2024

If you have been thinking about upgrading your business facility or vehicle, there is no better time than the present.

Today’s tax laws and resources can help your small business reduce energy and maintenance costs; create a more comfortable and productive work environment; reduce your carbon footprint; and enhance your brand.

The Federal Inflation Reduction Act (IRA) provides tax credits for operating more efficiently and cleaner. New York state offers tax credits and numerous clean-energy programs. Add to that the incentives, special services, and financing available through energy-related providers and your small business may find significant energy and monetary savings. (Of course, eligibility criteria apply.) For example…

For New Construction or a Retrofit (addition of something new to something old) of a Qualifying Energy Efficient Commercial Building

With the IRA’s Energy Efficient Building Deduction (a.k.a. 179d), when construction or updates reduce annual energy and power costs by at least 25%, and prevailing wage and apprenticeship requirements are met, your business can receive a deduction of $2.50/square foot. For each additional percentage that annual energy and power costs are reduced, the deduction increases by $.10, with the maximum deduction being $5/square foot (up from $1.88 in 2022).


One of the easiest ways to save energy (and money) is to upgrade to energy efficient lighting. Some LED solutions can save you up to 90% on energy related costs and some solutions can last up to 25 years without replacement. What’s more, if you make this part of new construction or a retrofit, upgrades may qualify for IRA deductions.

Building Envelope

Everything that goes into creating the shell of your building – walls, roofing, foundation, doors, and windows – is considered part of the building envelope. Improve temperature control, air quality, and condensation with building envelope updates like weatherstripping windows and doors, increasing insulation, and air leak sealing. Not only will your building be more comfortable, but you can also lower energy and operating costs, and possibly take advantage of IRA deductions.

Heating, Ventilation and Air Conditioning (HVAC)

Upgrading to a high-efficiency system can improve energy performance, especially if current equipment is more than 10 years old or malfunctioning. New clean heating and cooling systems not only save on energy, but also help your business reduce its carbon footprint. Plus, they have longer lifespans than older systems and provide more accurate temperature control. Make this part of a new construction project or retrofit to qualify for IRA deductions.


One of the cleanest energy options is solar. Businesses that adopt it can save up to 30% on installation costs with IRA tax credits, while potentially reducing energy costs by 75%. If interested, get started soon as these tax credits begin to phase out in 2033. In addition, New York offers solar tax credits (for the lower of $5,000 and 25% of installation costs). If your business is eligible for both the IRA and NY credits, you can reduce installation costs by more than 50%.


With the IRA’s Clean Vehicle Tax Credit, your business may qualify for up to a $7,500 credit for a plug-in EV or fuel cell electric vehicle (vehicles 14,000 pounds and over may qualify for up to a $40,000 credit). In addition, for cars, you may qualify for a $2,000 rebate under the Charge NY initiative, bringing your total potential tax credit to $9,500.


If you’re not sure where to start, numerous resources (including energy audits) are available through New York State and local utility providers (i.e., NYSEG, Orange & Rockland, or Central Hudson). Learn more about the many programs available to help your business operate greener and cleaner at https://www.nyserda.ny.gov/PutEnergyToWork/Industry-Energy-Solutions/Small-Business.