Energy Efficiency Tax Credits for Small Business: Commercial Buildings, Vehicles, and Equipment

By Yarik Yarosh, CPA ·September 5, 2026 ·8 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

The Inflation Reduction Act of 2022 (IRA) significantly expanded energy-related tax credits for businesses, and most provisions remain fully available through 2032 and beyond. Small business owners can take credits (dollar-for-dollar reductions in tax, not just deductions) for clean vehicles, solar installations, energy-efficient building improvements, and alternative fuel infrastructure. Unlike deductions (which reduce taxable income), credits reduce the actual tax owed. A $7,500 credit saves $7,500 in tax regardless of the taxpayer’s bracket. These credits can be combined with standard depreciation deductions, creating a double benefit on many energy investments.

✓Key takeaway

Energy tax credits and deductions for small business:

Credit/Deduction	IRC Section	Maximum Amount	Availability
Commercial Clean Vehicle Credit	45W	Lesser of 15% of basis or $7,500 (vehicles under 14,000 lbs) or $40,000 (over 14,000 lbs)	Through 2032
Clean Vehicle Credit (personal/business use)	30D	$7,500 (new vehicles)	Through 2032
Used Clean Vehicle Credit	25E	$4,000 or 30% of price (whichever is less)	Through 2032
Investment Tax Credit (solar, wind, geothermal)	48	30% of installed cost (6% base + bonus for wage/apprenticeship)	Through 2034+
Energy Efficient Commercial Buildings Deduction	179D	Up to $5.65/sq ft for qualifying improvements	Permanent (enhanced by IRA)
Alternative Fuel Vehicle Refueling Property Credit	30C	30% of cost, up to $100,000 per location	Through 2032
Energy-Efficient Home Credit (for builders)	45L	$2,500-$5,000 per dwelling unit	Through 2032

Commercial Clean Vehicle Credit (IRC 45W) details:

Factor	Details
Eligible vehicles	New plug-in EVs, fuel cell vehicles for BUSINESS use
No MSRP cap	Unlike the consumer credit, no $55K/$80K price limit
No income limit	Unlike the consumer credit, no AGI phase-out
No manufacturer cap	All manufacturers eligible
Basis reduction	Depreciable basis is reduced by the credit amount
Business use required	Vehicle must be used primarily for business

Solar Investment Tax Credit (IRC 48):

Component	Details
Base credit rate	6% (projects that don’t meet prevailing wage/apprenticeship requirements)
Bonus credit rate	30% (projects meeting prevailing wage + apprenticeship, or under 1 MW)
Small business bonus	Projects under 1 MW automatically qualify for 30% (no wage/apprenticeship needed)
Eligible costs	Solar panels, inverters, racking, wiring, installation labor, battery storage
Depreciation	MACRS 5-year recovery period (plus bonus depreciation) AFTER reducing basis by 50% of credit

How do energy credits work for a typical small business?

Hypothetical example

Round numbers. A landscaping company. S-Corp. Owner buys a new electric pickup truck and installs solar panels on the shop building.

Electric vehicle purchase:

Item	Amount
2025 Ford F-150 Lightning (commercial use)	$60,000
Business use percentage	100%
Vehicle weight	Under 14,000 lbs (GVWR)

Commercial Clean Vehicle Credit (IRC 45W):

Calculation	Amount
15% of basis ($60,000 x 15%)	$9,000
Maximum credit (under 14,000 lbs)	$7,500
Credit claimed	$7,500 (lesser of $9,000 or $7,500)

Depreciation on the EV:

Item	Amount
Purchase price	$60,000
Less: credit (reduces depreciable basis)	($7,500)
Depreciable basis	$52,500
Section 179 / bonus depreciation (Year 1)	$52,500
Deduction value (24% bracket)	$12,600

Total Year 1 tax benefit from the EV:

Benefit	Amount
Credit (IRC 45W)	$7,500
Depreciation deduction tax savings	$12,600
Total	$20,100

Effective cost of the $60,000 truck: $60,000 - $20,100 = $39,900. The government subsidizes 33.5% of the vehicle cost.

Solar panel installation:

Item	Amount
50 kW commercial solar system	$100,000
System size	Under 1 MW (automatic 30% rate)

Investment Tax Credit (IRC 48):

Calculation	Amount
30% of installed cost	$30,000
Credit claimed	$30,000

Depreciation on solar:

Item	Amount
Installed cost	$100,000
Less: 50% of credit (basis reduction)	($15,000)
Depreciable basis	$85,000
MACRS 5-year + bonus depreciation (Year 1)	$85,000
Deduction value (24% bracket)	$20,400

Total Year 1 tax benefit from solar:

Benefit	Amount
Credit (IRC 48)	$30,000
Depreciation deduction tax savings	$20,400
Total	$50,400

Effective cost of the $100,000 solar system: $100,000 - $50,400 = $49,600. The system pays for itself through electricity savings over 5-8 years, making the effective return on investment substantially positive.

EV charging station: The landscaper installs a Level 2 charging station at the shop.

Item	Amount
Charger + installation	$5,000
Alternative Fuel Refueling Property Credit (IRC 30C)	30% x $5,000 = $1,500
Depreciation (remaining $3,500)	$3,500 x 24% = $840
Total Year 1 benefit	$2,340

Combined tax benefits (Year 1):

Investment	Cost	Tax Benefit	Net Cost
Electric truck	$60,000	$20,100	$39,900
Solar panels	$100,000	$50,400	$49,600
EV charger	$5,000	$2,340	$2,660
Total	$165,000	$72,840	$92,160

The $72,840 in combined credits and depreciation deductions covers 44% of the total investment cost in Year 1. The solar system generates ongoing electricity savings ($12,000-$15,000/year), and the EV eliminates fuel costs ($5,000-$8,000/year), further improving the economics.

Important: credits vs. deductions The $7,500 EV credit and $30,000 solar credit are CREDITS (reduce tax dollar-for-dollar). The depreciation is a DEDUCTION (reduces taxable income). Credits are far more valuable. A $7,500 credit saves exactly $7,500 regardless of bracket. A $7,500 deduction saves $7,500 x tax rate (e.g., $1,800 at 24%).

Limitation: Credits can only reduce tax to $0 (they’re nonrefundable for most small businesses). If the total tax liability is less than the credits, the excess may be carried forward. The IRA did introduce transferability provisions for some credits, but these are primarily for larger projects.

Illustrative numbers only, not a real client and not advice for your facts.

Should I use the standard mileage rate or actual expenses?

The standard mileage rate is simpler and often better for newer vehicles with low operating costs. The actual expense method (gas, insurance, repairs, depreciation) is typically better for older or expensive-to-operate vehicles and for heavy trucks not subject to the luxury auto limits under IRC 280F. You must choose the standard rate in the first year you use the vehicle for business; if you start with actual expenses, you can never switch to the standard rate for that vehicle. For most owners driving 10,000-20,000 business miles, the standard rate produces $7,000-$14,000 in deductions with minimal recordkeeping.

What records do I need for the vehicle deduction?

The IRS requires a contemporaneous mileage log for every vehicle deduction, whether you use the standard rate or actual expenses. The log must record the date, destination, business purpose, and miles driven for each business trip. Commuting from home to a regular office does NOT count as business mileage, but driving between business locations, to temporary work sites, or to client appointments does. Apps like MileIQ or Everlance automate tracking. Without a log, the entire vehicle deduction can be disallowed on audit regardless of how many miles were actually driven for business. Bank and credit card records for gas alone do not satisfy the substantiation requirements.

Related guides:

Should you use the standard mileage rate or actual expenses for vehicle deductions?

The standard mileage rate for 2025 is 70 cents per mile, and you simply multiply your business miles by this rate to calculate the deduction without tracking individual expenses. The actual expense method requires tracking all vehicle costs (gas, insurance, repairs, depreciation, registration, lease payments) and multiplying the total by your business-use percentage. You must choose the standard mileage rate in the first year you use a vehicle for business; if you start with actual expenses, you can never switch to the standard rate for that vehicle. The actual expense method typically produces a larger deduction for expensive vehicles with high operating costs, while the standard mileage rate favors high-mileage drivers with fuel-efficient vehicles, so compare both methods in year one before committing.

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Cite this page

Yarik Yarosh, CPA. "Energy Efficiency Tax Credits for Small Business: Commercial Buildings, Vehicles, and Equipment." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-energy-efficiency-tax-credits-vehicles

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.