179D
The 179D Tax Deduction allows energy-efficient building improvements or new building construction to be eligible for a tax deduction of up to $1.80 per square foot. This deduction is available to taxpayers who build new assets or make upgrades to their lighting, insulations or HVAC systems. Additionally, architects and engineers that design energy efficient systems for government-owned buildings may also be eligible to take this deduction.
Earning the Maximum Deduction
Energy efficient property must be installed pursuant to a certified plan to reduce energy costs by at least 50 percent. Efficiency measures must not discriminate between fuel sources and the depreciable basis of property is reduced by the amount of the current deduction. To earn the maximum deduction, the energy-saving measures must address all three of the following building components:
- The interior lighting system
- The heating, cooling, ventilation and hot-water systems
- The building envelope, including windows, walls, foundations, slabs, ceiling, roof system and insulation
- A partial deduction of up to $.60 per square foot is available for the cost of energy-saving improvements to any of the above systems.
45L
The 45L Energy Efficient Home Tax Credit allows newly constructed or renovated residential facilities to be eligible for a tax credit up to $2,000 per unit. This tax credit is available to taxpayers who have facilities that do not exceed three stories and have a higher energy efficiency than the 2006 IECC standards. Qualifying properties include single family homes, apartments, townhomes, condominiums, and assisted living facilities.
Earning the Maximum Deduction
Qualifying improvements include:
- Windows (double-pane or triple-pane)
- HVAC units with a rating of SEER 13+
- R-28+ roof insulation
- R-13-19+ wall insulation
- 80+ percent efficient furnace system
- Exterior doors with extra insulation
How McGuire Sponsel Can Help
Alternative energy sources are growing and gaining interest, but there are many complicated issues surrounding the planning and execution of these projects. The profitability and viability of alternative energy projects hinges on understanding the tax incentive surrounding projects. McGuire Sponsel can help interpret 179D tax deductions and 45L energy inclusions, manage local incentives, perform site analyses, set up power purchase agreements, and assist with other complex issues.
What makes a great prospect?
179D
– New builds in excess of 30,000 square feet
– Renovations to the lighting or HVAC systems
– Architects or systems engineers that design buildings for governmental facilities
45L
– Newly constructed or substantially renovated residential facilities since 2017
– Buildings with more than 30 units