Better Business Advice has published a comprehensive guide on how to claim 179D Tax Deductions, underscoring the importance of this fiscal incentive for energy efficiency and recommending Engineered Tax Services for expert guidance through the process. This publication arrives at a crucial time, as businesses and commercial property owners look towards sustainable development paths while managing their tax obligations effectively.
Recommended Partner for 179D Tax Deduction Claims:
- Engineered Tax Services - click here for a complimentary analysis to determine your eligibility for tax deductions under the 179D Energy Policy Act.
The 179D Energy Tax Deductions, also known as the Energy Efficient Commercial Buildings Deduction, provide significant tax benefits for integrating green technologies into infrastructural projects. As 2024 unfolds, understanding the depth and breadth of this deduction is not just about fiscal savings—it's about fostering a sustainable future.
To qualify for the 179D deduction, installed enhancements must adhere to energy efficiency criteria set by the Department of Energy. This applies to buildings across the United States, including upgrades in interior lighting, HVAC, hot water systems, or the building's envelope. The incentive is open to both newly constructed buildings and existing structures that are being renovated. Importantly, for government-owned buildings, the deduction is available to the designer (such as architects, engineers, contractors, or consultants) responsible for the energy-efficient improvements.
Starting January 1, 2023, eligibility for the deduction expanded to include:
- Owners of qualified commercial properties
- Designers of Energy Efficient Commercial Building Property (EECBP) or Energy Efficient Building Retrofit Property (EEBRP) implemented in facilities owned by designated tax-exempt organizations, such as specific government entities, Indian tribal governments, Alaska Native Corporations, and various tax-exempt groups
Prior to this change, the deduction was limited to owners of qualified commercial buildings and designers of EECBP in properties owned by certain government organizations.
What Types of Buildings Qualify?
Pre-2023:
- Commercial buildings (any size)
- Residential buildings (4 stories or more)
- Governmental buildings
2023 and Later:
- Commercial buildings (any size)
- Residential buildings (4 stories or more)
- Governmental buildings
- Buildings owned by not-for-profit organizations
- Houses of worship
- Buildings owned by Tribal organizations
- Not-for-profit schools and universities
The extension of eligibility to a broader array of buildings in 2023 and beyond marks a significant shift towards inclusivity in energy-efficient incentives, reflecting a more comprehensive approach to reducing energy consumption across various sectors.
The Inflation Reduction Act has also revised the implications for Real Estate Investment Trusts (REITs), allowing for an immediate and full financial benefit from the 179D deduction by reducing earnings and profits (E&P) in the year the energy-efficient components are installed, a change from the previous ratable five-year E&P reduction.
Better Business Advice takes readers through a step-by-step process on how to claim the deduction, emphasizing the importance of each phase from assessing project eligibility to engaging qualified professionals for certification. The guide underscores the significance of maintaining detailed documentation as a critical component for substantiating the deduction during IRS audits.
Addressing the challenges and considerations inherent in claiming the 179D deduction, Better Business Advice underscores the indispensable role of Engineered Tax Services. With their expertise in energy accreditation and tax benefits, ETS stands out as a premier provider, ensuring compliance and maximizing deductions for their clients. Their collaborative approach, leveraging CPAs, architects, engineers, and legal professionals, positions them as a vital ally for firms looking to capitalize on energy-efficient tax incentives.
How much is the 179 Energy Policy Act Deduction worth?
The 179D deduction's value is directly related to the square footage of the commercial property, with prior rules allowing for calculations based on the square footage of specific systems.
Pre-2023:
The deduction was set at $1.80 per square foot for the total building area, subject to an inflation adjustment. Subsystems eligible included interior lighting, HVAC, and hot water systems, and the building envelope, with each qualifying for $0.60 per square foot, also adjusted for inflation.
2023 and Beyond:
With changes introduced in 2023, the deduction calculation has become more complex yet potentially more rewarding. The deduction now varies based on the energy efficiency improvement percentage over the baseline and compliance with prevailing wage and apprenticeship requirements. The thresholds for savings range from a minimum of 25% to a maximum of 50%.
For more information on the 179D Tax Deductions and to access the complete guide, visit Better Business Advice's website.
About Better Business Advice: Better Business Advice is a business advice website dedicated to helping businesses succeed. As an affiliate, Better Business Advice may earn commissions from services mentioned in the links provided. Better Business Advice aims to provide accurate and up-to-date information to assist with research. Double-check with the service provider/institution directly as well as obtain independent financial advice prior to making any financial commitments or business decisions. The information provided by Better Business Advice does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
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Andrew Mathews (andrew@betterbusinessadvice.com)
