The Energy Policy Act of 2005 created the Energy-Efficient Commercial Buildings Tax Deduction. It is intended to reduce the initial cost of investing in energy-efficient building systems via an accelerated tax deduction. Today, most building code requirements call for much higher energy efficiency standards, so there is a good chance that new construction projects will qualify.
- Building owners and lessees who make energy-efficient improvements to their commercial buildings
- Architects, engineers and contractors engaged in the design work of federal, state or local government-owned buildings
- Qualifying businesses can receive up to $1.80 per square foot in deductions for eligible projects placed into service any time from 2006 to 2016
- Includes energy improvements covering lighting, HVAC and building envelope projects
- Provides the ability to go back three years to receive the benefit
House Passes Inflation Reduction Act – Significant Energy Policies to Become Law
Included in the IRA is an extension and expansion of 179D deductions and 45L tax credits to continue incentivizing the construction and renovation of energy efficient buildings in the U.S.. Here is what you need to know:
What are the changes for the 179D Energy Efficient Commercial Building Deduction?
- Extension “as-is” until December 31, 2022.
- Beginning January 1, 2023, the deduction is expanded.
- Energy Reduction (ER) is changed from 50% to 25% compared to the most recent ASHRAE Standard 90.1 determination no later than 4 years prior to placed in service date.
- Deduction is reduced to $.50 per square foot, plus $.02 for each percentage point above 25% ER, not to exceed $1.00 per square foot.
- OR the bonus deduction can be claimed for $2.50 per square foot plus $.10 per square foot for each percentage point above 25% ER, not to exceed $5.00 per square foot.
- IF the prevailing wage requirement is met, which states that any laborers, workers, contractors and subcontractors whom worked on the project were paid wages not less than base wages determined by the local labor authorities.
- New qualified retrofit plan qualifications and removal of the partial benefit allowances.
- Expansion to allow allocation of 179D deductions to any non-profits, tribal properties, and REIT’s, in additional to the existing provision for publicly funded projects.
What are the changes for the 45L Energy Efficient Home and Multifamily Credit?
- Prior rules extended from December 31. 2021 to December 31, 2022.
- Changes implemented beginning January 1, 2023 through December 31, 2032.
- A lower based line credit of $500 per unit for multifamily units
- OR a bonus credit increase to $2,500 per unit for multifamily units if the prevailing wage requirements are met.
ReFOCUSed offers a more cost-effective and hands-on approach to 179D studies. Applying is Easy!
Most business owners are not aware of this tax credit and don’t really know where to begin, but Refocused Business Consulting is here to help. We’re happy to provide you with a free consultation to answer all of your questions and find out if you qualify. If you do, we’ll be able to estimate your tax credit before you make any commitment. We also assist in completing the necessary documentation and substantiating your claim. Finally, we’ll work directly with your CPA to assure that all documentation is submitted properly.
To learn more about the 179D tax deduction or 45L tax credit from the experts at ReFOCUSed, call (951) 225-5681.