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Energy Efficient Building Deductions
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IRC Section 179D, enacted by Section 1331 of the Energy Policy Act of 2005 (EPAct 2005), allows taxpayers to accelerate depreciation on the cost of qualified energy efficient commercial building property placed-in-service after December 31, 2005. This incentive was most recently extended by the Emergency Economic Stabilization Act of 2008, to include improvements placed-in-service before January 1, 2014.
Eligibility
Eligible improvements must reduce total annual energy costs by a specific amount compared to a Reference Building under ASHRAE Standard 90.1-2001. The project must be certified by a properly licensed engineer or contractor in the jurisdiction in which the building is located.
Benefits
A first year tax deduction of up to $1.80 per square foot is available for the cost of energy efficient property, including design and installation. This is achieved by qualifying for a deduction of up to $0.60 per square foot in three separate categories; interior lighting, HVAC and building envelope. The deduction is based on total building square footage, but cannot exceed the cost of the energy efficient improvements.
What’s a Good Candidate?
• Newly constructed buildings of at least 40,000 square feet.
• Renovation projects (especially lighting retrofits).
• Regional and national chains with multiple locations.
Architects & Engineers
When non-taxpaying entities (schools, municipalities and governments) implement qualified improvements the deduction may be claimed by the primary designer.
Getting Started
Maximizing the 179D deduction is all about design. Not all energy efficient improvements qualify; therefore it is important to get Bedford involved early. Additionally, there may be other incentives or strategies available that can further enhance benefits for the same project, resulting in a greater ROI and reduced payback period.
Contact Information
Bedford’s team of subject matter experts is ready to assist you. Contact us today to learn more about the tremendous benefits available for energy efficient improvements and to request a complimentary feasibility analysis.
Bruce Johnson – Managing Partner | Karen Koch, CPA, MT – Partner