2013 isn’t the only thing that’s coming to an end on December 31 – the 179D Tax Deduction (179D) will be too, at least for now. In a recent article in Forbes, “179D Tax Break for Energy Efficient Buildings – Update,” writer Dean Zerbe informs readers on the little-known, lucrative opportunity for building professionals that may be ending soon.
According to the Tax Analytics Group, only 10% of qualifying projects utilize 179D, also known as the Energy Policy Act (EPAct), which was enacted in 2006 by the Internal Revenue Service to provide incentives to make buildings more energy efficient. Currently, architects, engineers, contractors and building owners can receive tax deductions of up to $1.80 per square foot for the construction or improvement of energy efficient commercial buildings. Any commercial building from warehouses and parking garages to schools and university dormitories can be considered. Zerbe notes, however, that for the “economics to make sense, the building should be greater than 50,000-square-feet.”
Better yet, architects, engineers and contractors can receive partial or full deductions for constructions they’ve worked on within the last three years and building owners can go back in the past six. The tax deduction amount is determined by the following requirements:
- Building must surpass 2001 ASHRAE Standards. Good news is that with today’s stricter building code requirements, most states already require this.
- To achieve the maximum $1.80 tax deduction, the building’s energy and power costs must be reduced by at least 50 percent when compared to conventional like-buildings.
- Partial tax deductions of $0.60 or $1.20 per square foot can be given for the building envelope, HVAC/hot water systems and interior lighting systems individually. To receive partial deductions, the building envelope must be 10 percent more efficient than standard constructions and both HVAC/hot water and lighting must reach a 20 percent improvement.
As Zerbe bluntly says, “179D is a commonsense, technologically neutral way of encouraging energy efficiency.” And, above all, it is an effective means for businesses and building professionals to receive thousands of dollars in savings. So, while the option is still on the table, submit your old energy efficient projects and speed up this year’s plans to create new ones.
Click here to read the full Forbes article. To find out if your energy efficient buildings qualify for the tax deduction, visit the U.S. Department of Energy’s Office of Energy Efficiency & Renewable Energy website.