Tax Incentives for Energy Efficient Buildings

Happy Tax Day! Did you get all the deductions and credits you were eligible for this past year? A type of tax incentive you might not have heard of (and may have even missed) are deductions for energy efficient buildings.

Tax incentives exist for a variety of reasons. They can be used to attract business or consumers, to stimulate a specific part of an economy, or even encourage public service through nonprofits and charitable donations. In this case, they are used to reward building owners for implementing energy efficient measures when building or upgrading their facility or equipment. Fortunately, the requirements for these incentives are often easily met with little or no change to the original plans of a project, without requirements for solar arrays, wind turbines, or other renewable energy installations.

Section 179D of the federal tax code outlines the “energy efficient commercial buildings deduction” based on policy enacted under the Energy Policy Act of 2005 (EPAct 2005). Based on the requirements set forth, building owners can receive a tax deduction in a number of ways by simply exceeding basic requirements that are laid out in the law. This can be done using a whole building model worth up to $1.80 per square foot, or incrementally by system type with up to $0.60 per square foot each for HVAC systems, building envelope, and lighting. That means an example 35,000 square foot building would be eligible for a tax deduction of up to $63,000! Additionally, even if you’re only doing a lighting upgrade, you can still qualify for a partial incentive. Finally, there are no “all-or-nothing” requirements, so even at the system level you can get fractional incentives if you don’t meet the guidelines fully.

With a little help from a qualified energy efficiency partner, 179D deductions can easily be claimed, often making a huge difference on the bottom line of a project. A 3-year “look back” period means that past facility upgrades may still be eligible for a tax deduction. Even governmental buildings who don’t pay taxes can take advantage by signing the deductions over to their contractor, engineer, or architect, and receive some benefit in return.

With little effort, this incentive can be a win for many and have a huge financial impact for building owners and contractors alike. Call Entriq Solutions to learn more about the many incentives that exist for your area and ensure a more pleasant Tax Day 2018.