What Is The 179D Tax Deduction And How Does it Work?
So, you’ve heard about the 179D but are unsure what it is or how it works. You’re also probably wondering how it could potentially benefit you and your business. Well, if any of that sounds like you, we have good news: You’ve come to exactly the right place! This short article is your one-stop-shop primer for the 179D. So, let’s get started.
What Is The 179D Anyway?
The Section 179D tax deduction, as it’s officially known (often referred to as the Energy Efficient Commercial Buildings Deduction) is a federal tax incentive designed to encourage energy efficiency in buildings. This deduction was introduced as part of the Energy Policy Act of 2005 and has since been extended and modified to promote sustainable building practices.
Ok. How Do I Qualify?
To qualify for the 179D tax deduction a building must meet specific energy efficiency standards set by the Department of Energy (DOE). The standards are primarily based on the building's energy systems, including lighting, heating, ventilation, and air conditioning (HVAC). Buildings that exceed these standards are eligible for tax incentives.
It’s broken down into three main components:
Lighting Systems: The lighting system component focuses on the energy efficiency of the building's lighting fixtures. Upgrades or installations that reduce energy consumption and meet certain efficiency criteria likely qualify for deductions.
HVAC Systems: The HVAC component considers the efficiency of heating, ventilation, and air conditioning systems. Improvements or installations that enhance energy performance and meet specified standards are eligible for deductions.
Building Envelope: The building envelope, which includes walls, roofs, windows, and insulation, plays a crucial role in a structure's overall energy efficiency. Upgrades that improve the insulation and thermal properties of the building envelope may qualify for deductions.
Got it. So What Does This Mean For Me?
The 179D tax deduction allows architects, designers, specifiers, engineers, contractors, etc., to claim up to $5 per square foot for energy-efficient improvements made to eligible properties. The deduction is applicable to both new construction and renovations of existing commercial buildings (depending on exactly when the building was started). The total deduction amount is calculated by combining the three components mentioned earlier.
It's important to note that the deduction is capped at $5 per square foot, but partial deductions may be available if only one or two components meet the required efficiency standards.
Great! How Do I Get My Deduction?
To claim the 179D tax deduction, you must obtain a certification from a qualified individual or entity. The certification involves an analysis of the building's energy systems and an evaluation of whether the property meets the necessary efficiency standards. This certification is crucial when filing tax returns and should be kept on record in case of an audit. This certification cannot be conducted by yourself or your own business, and must be done by a third-party for purposes of impartiality.
And that’s where Credistry comes in…
We handle the whole 179D process for you, offering top tier customer support, and handholding through the whole thing. We have engineers and accountants on staff that are amongst the top experts in the country when it comes to the 179D; we handle the building certification, calculations, and filings so all you have to do is provide your info to us, sit back, relax, and get that tax deduction you deserve!
