US federal energy tax credits available for small businesses

Small businesses can utilize federal energy tax credits and deductions for efficiency upgrades when filing 2026 federal income tax returns. These incentives, expanded by the 2022 Inflation Reduction Act, apply to qualifying improvements such as HVAC systems, LED lighting, insulation, and solar panels.

Key financial benefits include the Investment Tax Credit (ITC), which allows businesses to claim 30% of the cost of qualifying solar and clean energy systems. Additionally, the Section 179D deduction enables building owners to deduct up to $5.94 per square foot for energy-efficient commercial building improvements.

Tax credits reduce a business's tax bill dollar-for-dollar, whereas deductions lower taxable income. These business energy credits are processed through IRS Form 3800, the General Business Credit. Credits apply to the tax year in which the system is placed in service.