IRS.com is a privately owned website.

Investment Tax Credits

With tax and investment questions running wild, many people never find out what they really qualify for. In turn, they end up missing out on tax credits and tax deductions that can save them a lot of money at tax time. It is important that you are aware of the many investment tax credits, and of course, whether or not you qualify for them.

Tax credits are more or less an incentive that permits individuals or businesses to deduct a certain percentage of investment costs from their overall tax liability. This is in addition to the normal allowances in effect for deprecation. In the end, the more credits you are eligible for the less you will owe in investment taxes.

There are many ways in which investment tax credits are similar to investment tax allowances. That being said, this is different than accelerated depreciation because you are offered a percentage deduction at the time of purchase.

Believe it or not, investment tax credits have been helping companies and individuals for many years. They were first put into place by the United States and the IRS in 1962. At the time, the main advantage of investment tax credits was to protect American business from growing foreign competition. As of late, though, these credits have shifted the way in which they help. Presently, they are more for pollution control, energy conservation, and other methods of economic development.

Some of the investment tax credits that you may be familiar with include: the Reforestation Credit, the Business Energy Investment Credit, and the Rehabilitation Tax Credit.

The Business Energy Investment Credit is known as a corporate tax credit. Eligible technologies include: solar thermal process heat, solar thermal electric, solar water heat, solar space heat, fuel cells, geothermal direct use, biomass, wind, and geothermal heat pumps, among others.

Of course, the IRS has put limits on investment tax credits. For example, fuel cells that qualify for the Business Energy Investment Credit have a maximum incentive of $1,500 per 0.5 kW. Microturbines are capped at $200 per kW.

Businesses, in particular, spend a lot of time mulling over tax and investment questions. A single tax credit can help a business, regardless of size, save thousands of dollars or more.

While you may never qualify for investment tax credits, it is important to know how these apply to individuals and companies. Tax and investments go together hand in hand. You should always be thinking about how you can save money with the help of credits and deductions.


You May Also Like