Energy Efficiency Tax Deductions

In recent years, energy efficiency has become a hot topic. Not only does it reduce waste and help the environment, but it reduces the costly energy bills and expenses common in the real estate industry. Thanks to the Energy Policy Act of 2005 there is now another reason to invest in energy efficiency. Now qualifying real estate owners and leaseholders of commercial real estate are also able to reduce their overall tax liability. Taxpayers who own or lease a commercial building and install energy efficient components, including: interior lighting systems, heating, cooling, ventilation, and hot water systems generally qualify for the Section 179d deduction.

Deduction Benefit

The deduction benefit depends on the amount of energy reduction the upgrades and changes accomplish. Broadly speaking, the amount of the deduction is $1.80 per square foot of floor area for buildings that achieve a 50% reduction in energy costs. Properties that achieve a reduction in energy and power costs of less than 50% qualify for a deduction of $0.60 cents per square foot of floor area if the building achieves a 16⅔% reduction in energy costs. In order to qualify for the deduction, a certification must be received to ensure installation satisfies established requirements.

Additionally, the Department of Energy will create and maintain a public list of software that must be used to calculate energy savings for purposes of providing the certification.

Contact Us

There is a significant tax benefit to property owners and leaseholders for installing energy efficient equipment and systems. If you have questions about a recently completed or upcoming renovation which you think may qualify, contact us today. For additional information on energy efficient tax deductions, please contact JLK Rosenberger at 949-860-9902, or click here for email. We look forward to speaking with you soon.