A trusted advisor can help you take full advantage of energy efficiency credits and deductions such as 179D and 45L. Eide Bailly is the number one accounting firm offering 179D and 45L services with professional engineers, energy modelers and HERS raters all in-house and at the ready to help you maximize your energy credits and deductions.
Section 179D Energy Efficiency Deduction
179D is a section of the tax code that provides a deduction of up to $1.88 per square foot for energy efficient commercial building property (EECBP).
Privately Owned Buildings
Privately owned commercial buildings (industrial, office, retail, healthcare, etc.) and residential buildings at least 4-stories tall that include energy-efficient components and were placed in service as of January 1, 2006 could benefit from the Section 179D Energy Efficiency Tax Deduction. Deductions of $0.60 per square foot are available for interior lighting, building envelope or HVAC and hot water systems that meet certain energy efficiency standards, for a total deduction of up to $1.88 per square foot. The owner of the EECBP is eligible for the deduction—this is typically the building owner but could include tenants who have paid for and are depreciating the EECBP.
Most government-owned buildings (both newly constructed and renovated) that are substantially complete in an open tax year can potentially qualify for the 179D deduction. The “designer” of government-owned EECBP is eligible for the deduction. A designer creates the technical specifications for installation of EECBP and could include architects, engineers, general contractors and subcontractors. However, a person that merely installs, repairs or maintains the property is not a designer. Note: projects may have more than one qualifying designer. It is advantageous to pursue this deduction as early in the process as possible. If you were the designer of the EECBP of a government-owned facility placed in service in an open tax year (typically the last three), you could benefit from the 179D deduction.
Section 45L New Energy Efficient Home Credit
Section 45L New Energy Efficient Home Credit is a tax credit for properties that meet certain energy efficiency standards. Newly constructed or substantially renovated low-rise multifamily and single-family homes that utilize energy-efficient building components, leading to energy savings of at least 50% over the 2006 International Energy Conservation Code, are eligible for the 45L credit up to $2,000.
Energy Efficient Retrofit Study
This tax deduction can be generated by an energy efficient retrofit of an existing building. For-profit clients may qualify if they own and have basis in both a new energy-efficient property and an existing property that is being replaced. This study is comprised of a Section 179D energy efficiency deduction, qualified improvement property, cost segregation and partial disposition analysis. The deduction amount varies based on a number of variables, but we typically see deductions up to $6-10 per square foot of renovated space.
How Do You Qualify for Energy Efficiency Tax Credits and Deductions?
The first step in understanding the energy efficient credits and deductions is knowing if you qualify. Here are some key indicators that you may be eligible for 45L or 179D:
- You are renovating an existing structure or building a new building.
- You are a building owner in the construction and real estate industries who uses energy efficient lighting or HVAC.
- You are a general contractor, electrical contractor, HVAC contractor, supplier, architect or engineer for a government-owned building.
- You own a 10-unit or larger low-rise multifamily building or are a production home builder.
Choosing the Right Firm for Your Energy Efficiency Credits and Deductions
Tax credits and deductions exist to help you save money and operate efficiently. But often the first step is understanding if you even qualify. Working alongside a trained professional who specializes in tax credits and deductions can help you make sense of your particular situation and maximize the benefit.
Eide Bailly’s nationally recognized industry specialists have expertise to help you maximize energy efficient incentives. They have worked with hundreds of clients, helping to achieve maximum benefit and equating to millions of dollars saved.
The following are examples of organizations that have benefited from working with Eide Bailly’s energy efficient credits and deductions team:
- We worked with a townhome complex owner to obtain the 45L credit. The complex was comprised of 56 units and included energy-efficient mechanical systems and building envelopes. By gathering the necessary information and completing the certification, the client received over $104,000 in credits on their current-year tax return; the maximum credit allowable would have been $112,000 (56 units x $2,000/unit).
- We worked with a manufacturing company to obtain the Section 179D deduction. The manufacturing facility underwent an 183,000 square foot expansion, which included installation of both energy efficient HVAC and lighting. By gathering the necessary information and completing the certification, the client received over $325,000 in deductions on their current year tax return.
Our energy efficient credits and deductions team understands the ins and out of the 179D energy efficient tax deduction and the 45L energy efficient tax credit. They will help you assess your eligibility and then work with you to maximize the potential benefit of energy efficient incentives.
Take the confusion out of the energy efficiency tax credits and deductions process. Work alongside a nationally recognized CPA firm with a proven track record of helping clients utilize the 179D and 45L credits.