If you own or lease a retail, office, industrial, warehouse, or apartment building (at least four stories), or design and build government buildings, pay attention to the Commercial Buildings Energy Efficiency Tax Deduction, also known as IRS Code Section 179D.
The deduction was originally set to expire at the end of 2020, but it was made permanent by Congress.
Section 179D allows commercial building owners and government contractors (architects, engineers, designers, energy consultants, and retrofitters) to claim a tax deduction for installing qualifying energy-efficient systems such as lighting; heating, ventilation, and air conditioning (HVAC); and building envelope systems including roofing, insulation, windows, exterior doors, foundation, and walls.
The Consolidated Appropriations Act (CAA) set the amount of the tax deduction at $1.80 per square foot (subject to increases for inflation) for systems that improve by 50 percent an entire building’s energy efficiency.
If the 50 percent threshold is not reached, a partial 60-cent per square foot deduction is available for increasing energy efficiency for the interior lighting (25 percent savings), HVAC (15 percent savings), or building envelope systems (10 percent savings).
To qualify, the improvements must be certified by a licensed engineer or contractor according to efficiency standards set by the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE).
Your business may still be able to take advantage of this deduction, even if you didn’t claim it in a prior tax year. Not only can you reduce your tax liability, but you’ll save on energy costs.
The tax code is always evolving. The abrupt change in the Commercial Buildings Energy Efficiency Tax Deduction is just one example of why it is important to have a trusted tax advisor who knows the details of your industry and your specific business. Contact Dembo Jones today so we can help you maximize your tax savings and set your business up for success.