Decrease Your Texas Business Taxes With Solar Power
For most, when we look at our income, we become sick thinking about how much went to taxes. Then, at the end of the year, many end up owing even more than they had initially planned to. This is especially true among spirited entrepreneurs. Benjamin Franklin said that, in this world, the only things we can be certain of are death and taxes. We can’t get rid of taxes completely, but with commercial solar, you can decrease them.
Texas Solar and Property Tax — What Businesses Should Think About
One way in which solar can help decrease your taxes in Texas is through property taxes. When you add solar to your property, it increases the value of your building. This means that, normally, you would owe more in property taxes with the addition of solar.
Texas, however, has a renewable energy property tax exemption in place. This exemption covers 100 percent of the added value of solar to your property.
How You Get Solar Related Property Taxes Covered
In order to claim this exemption, you need to first fill out form 50-123. You can file online through Webfile. This is part of the Texas Comptroller eSystems.
Get Depreciation Tax Deductions With Solar
One of the lifesavers in a business is tax write-offs. Write-offs, also known as tax deductions, allow businesses to decrease their taxes.
The tax deduction that solar is under is depreciation also known as MACRS. MACRS allows businesses to recover a portion of certain depreciating equipment each year. You can have up to 100 percent of the system covered over the course of several years with this deduction.
What You Need in Order To Qualify for MACRS
To determine your allowable deduction, you need to first fill out form 4562. You can use the IRS MACRS worksheet to help you fill out form 4562. If you are filing taxes through tax software, you don’t need to worry about additional forms.
Texas Solar Energy Franchise Tax Deduction
As of September 1, 2018, energy projects can now receive a franchise tax deduction in Texas. Each entity can get a tax credit for the lesser of either 10 percent or 100 million for up to three projects. This credit can get applied to company taxes over the course of up to 20 consecutive years.
How To Obtain Texas Energy Franchise Tax Deductions
You need to provide several items to the Comptroller’s office to get this deduction.
- Verification of the completed project
- Certificate of compliance from the Texas Railroad Commission.
- Verification from the Bureau of Economic Geology of the University of Texas
- Verification of an interconnection agreement
- The total capital cost of the project
Business Energy ITC for Texans Getting Solar
The federal business energy investment tax credit currently covers 30 percent of solar. This tax credit gets applied to owed federal taxes. If you do not owe the full amount of the credit it gets carried over to the next year until it is completely used.
This credit will stay at 30 percent until 2020, where it will decrease to 26 percent. It will then decrease every year until 2022 where it will reach, and stay at, 10 percent.
Getting the Business ITC for Your Texas Business
To qualify for the ITC, you need to owe federal taxes. If you do not owe federal taxes, then there will be nothing for you to apply the credit to.
In order to get this tax credit, you need to fill out IRS form 3468 for the year of your solar installation. You then keep this form for your records in case of an audit.
You claim this credit when you fill out your federal taxes at the beginning of the year. On your tax form, it should ask you if you have any energy credits. You find out what 30 percent of your array is and report the amount owed to you that year.
Make sure that you have the correct form for the year your array got installed, because the forms change. You may have to wait until part of the way into the next year before you can get the right 3468 form.