America is one of 196 parties committed to reducing global warming to 1.55 by 2030, under the Paris Agreement. So, it’s not surprising that the federal government has introduced attractive tax incentives to get citizens on board.
The 179D tax deduction is one of these measures aimed at businesses in the USA that take steps to improve energy efficiency. Sadly, few of those who qualify for this saving know what is and how to go about getting their deduction.
Find out more about how you can benefit by designing, building, and refurbishing energy-efficient buildings, here.
What Is the 179D Tax Deduction?
The Section 179D deduction came about in January 2006, under the Energy Policy Act of 2005. It is permanently entrenched in the tax code and has no expiry date.
This tax incentive allows for taxpayers to deduct up to $1.80 per square foot of their building if they implement certain energy-efficient measures.
It applies to the owners and tenants of the buildings as well as designers, architects, and engineers of government-owned buildings.
The 179D deduction applies to energy-efficient measures like installing Energy star appliances, efficient HVAC systems, insulation, lighting, and reflective roof coatings.
How Does It Work?
The deduction applies to improved buildings and new constructions that exceed the latest Standard 90.1 published by ASHRAE and the Illuminating Engineering Society of North America.
Members of any industry can apply for this tax benefit.
According to https://tri-merit.com/section-179d/, there are three levels of qualification for this incentive.
You can make deductions based on qualifying improvements as follows:
- $1.80 per square foot, for reducing annual energy and power costs by 50% across all three levels
- $0.60 per square foot, per HVAC, lighting, and building envelope systems
- $0.30 to $0.60 per square foot for lighting improvements
The maximum deductions are $90,000 for a 50,000 sq. ft. building, $180,000 for a 100,000 sq. ft. building, and $900,000 for a 500,000 sq. ft. building. If you own multiple buildings, you can save millions on your tax by applying for these deductions.
Claiming Your 179D Deduction
You can claim your 179D energy-efficient tax deduction when you complete your annual tax return. This is the process:
- Compare your building to the standards set by ASHRAE 90.1
- Arrange for a third-party inspection by a qualified and licensed inspector
- Get the signed documentation from the inspector
- Submit the documents with your tax return
Designers, architects, and engineers must get an allocation letter from the owner of the building to qualify for the deduction.
Ideally, you should claim for energy-efficient improvements in the same year they’re implemented, but you can claim retrospectively, too.
Green Initiatives Boost Your Business
The 179D tax deduction isn’t the only way you’ll save when implementing energy-efficient measures in your business. Green buildings also save you money on your electricity bills and maintenance costs.
What’s more, many consumers prefer to do business with eco-conscious businesses, so you can also increase your company’s reputation and help attract more customers.
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