What are 179D tax credits?
Section 179D, part of the Energy Policy Act of 2005, represents an enticing tax incentive available to building owners who focus on energy efficiency in their commercial properties. While often referred to as a tax credit, it’s technically a tax deduction, reducing your total taxable income rather than your tax payments directly.
Why were they instituted?
The institution of these deductions had two main motivations: to reduce energy consumption on a large scale by offering attractive incentives for energy-efficient commercial buildings; secondly, to stimulate economic growth and job creation within the energy sector. In essence, it’s a call to building owners to play a part in saving the planet, while saving some money too!
Benefits of the 179D credit
Going green with your buildings has some clear perks. Primarily, the tax deductions are a real boon, offering substantial cost savings. A deduction of up to $1.80 per square foot is possible if specific energy-saving targets are met. And it’s not just immediate tax savings – the building’s running costs can also decrease thanks to optimized energy use.
All this while contributing towards a cleaner environment and potentially driving up your property value thanks to modern, energy-efficient infrastructures.
How can a building qualify for them?
Qualification involves a few key steps:
Commercial Buildings: Any commercial properties can potentially qualify, regardless of size.
Energy Savings Targets: Your building needs to meet energy-savings targets as per the standards set by the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE).
Certification: You need a qualified third-party to provide certification, stating that your installation achieves the required energy savings. This will include detailed energy modelling and an on-site inspection.
Conclusion
In wrapping up, the 179D tax deduction can offer invaluable returns for business owners willing to invest in energy efficiency. Not only could it significantly cut down on your tax liability, but the long-term energy savings and potential increase in property value are also salient benefits. I can help you to make sure you meet the latest ASHRAE criteria and to guide you through the detailed processes involved. Contact me for a free analysis.
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