In the end of December 2014, the incentive was extended retroactively to cover all projects executed during the year. This means that investors still have possibilities to claim the deduction for projects executed in 2014 and corresponding to all requirements. 

How EPAct 179D Works

The deduction can reach up to 1.80 dollars per square foot of the commercial building’s area for all improvements. Alternatively, the deduction is 0.6 dollars per square foot for lighting improvements, building envelope or HVAC improvements, respectively.

The 179D tax deduction provides a lot of flexibility since the definition of a commercial building is rather broad. It includes offices, industrial buildings, warehouses, production facilities, multi-family residential buildings, dormitories or buildings that were constructed for other purposes but were later on redesigned.

The lighting, HVAC and building envelope improvements can be executed in a number of ways. The architect and engineer have a lot of freedom when it comes to guaranteeing the energy efficiency of the building. The end result should be a commercial building that produces 50 percent bigger electricity consumption savings than a comparable unit.

Over the past years, the energy efficiency requirements for new commercial constructions were seriously tightened. This is one of the main reasons why many new projects will qualify automatically for the 179D tax deduction.

Wondering whether your project qualifies for the initiative? An independent third party will evaluate its energy consumption and help you figure out whether the building can be certified under EPAct 179D.

Lighting, HVAC and Envelope Improvement Guidelines

These are the three categories of improvements that will result in certification for the 179D tax deduction.

The use of modern light opportunities like LED, induction and fluorescent lights is one of the preferred possibilities. The commercial building should also be built to enable maximum usage of natural light.

The upfront investment cost in modern lighting solutions is still high but the energy savings these produce and the manner in which they affect the value of the residential building justify the expenditure.

When it comes to HVAC and building envelope improvements, architects and engineers have an even bigger number of possibilities to choose among. Everything from the selection of quality materials to cleverly designed roofs will impact the energy efficiency of the building.

The 179D tax deduction could become available through the execution of projects like geothermal heat pump installations, the use of energy-efficient windows and doors, insulation, central air conditioning, the use of roofing materials that reflect rather than absorb solar heat and the installation of solar photovoltaic systems.

Any entity that executed such commercial construction projects throughout 2014 is entitled to a 179D tax deduction. Getting the building certified and proving its energy efficiency is the first step towards obtaining the incentive.

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The Ins And Outs of 179D

The 179D tax deduction rewards commercial builders whose efforts to increase energy efficiency surpass industry standards. The higher a newly-constructed building’s energy efficiency is, the higher the deduction they will receive.

This provision measures the efficiency of a building in three ways: the lighting, the building’s envelope and its HVAC system. Interestingly, technology doesn’t play a role in 179D. Success is what is rewarded with this provision, and not the technology used to achieve it. This has resulted in much innovation and several new ideas for how to increase the efficiency of commercial buildings.

To ensure that the energy saved with a newly-constructed green building is accurate, the provision requires independent certification to be obtained after a building has been put into service. Usually, a licensed engineer executes the certification.

Governments Also Encouraged to Build Green

179D encourages government at all levels to go green with their new buildings. Here, tax deductions get passed to the building’s designer. This has proven to be a much-welcomed event for those smaller engineering, architecture and construction companies in the country, because these deductions have allowed thousands of construction jobs have been created and continue to be able to be maintained. As well, national contracting, engineering and architectural organizations have been able to keep more money in their coffers instead of handing funds over to the IRS.

Advantages to Taxpayers

There is also a significant taxpayer benefit where 179D is concerned. The significant cost of energy inefficiency is usually passed on to the taxpayer, to the tune of $10 billion per year. According to the EPA, this amount could be reduced by as much as 30% if more energy-efficient buildings were being used.

Where school districts are concerned, more money per year is being spent on energy than on computers and textbooks combined – $6 billion per year. And inefficient usage of energy makes up one-third of that amount.

However, when energy efficiency is improved across state government, schools and local government, real cost savings are the result.

Although 179D expired at the end of 2013, it did receive an extension. This extension raised the energy standards, which will only encourage further efficiency. Builders, architects and engineers will now have to work harder to receive the deduction. However, this will only serve to benefit society as a whole.

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1. Lower Building Costs With the 179D Tax Incentive

The Federal government gives architects and engineers a tax deduction for the structure they are building, which is called the 179D tax incentive. This incentive is for each square foot of the building. For the previous year, the 179D tax incentive covered approximately $1.80 per square foot. Please note, the amount of the deduction for the coming tax-year will change. Architects and engineers must keep up on the latest news about tax changes in the coming year.

Another important aspect of building an energy efficient structure is that the overall payments for operating it will be significantly less. This will help any business within the structure save hundreds to thousands of dollars per year. 

2. Positive Impact on the Environment

Aside from the 179D tax deduction, building an energy efficient structure will have a positive impact on the environment. It will use less energy from main sources like water and electricity, conserving the resources the world holds precious. An energy efficient structure will also have lower greenhouse gas emissions, which will help cut back on the degradation of the atmosphere.

This positive impact does not just come from the building upon completion, but also from the energy it takes to build the structure. In order to qualify for the 179D tax incentive, builders will have to use energy efficient and eco-friendly methods throughout the entire process, creating a positive impact on the earth. 

3. Workers Will Live Healthier, Longer Lives

By cutting down on the high amounts of greenhouse gas emissions and using energy efficient, eco-friendly appliances, the workers’ health will improve significantly. Architects and engineers who install proper ventilation systems will improve the air quality of the building, keeping construction workers and eventual business workers from breathing in harsh microbial contaminants. Giving individuals a clean environment to work in could cut down on serious lung diseases and overall poor health. 

The 179D tax deduction and energy efficiency have several benefits that all architects and engineers should take advantage of to improve their finances and the environment. Claris Energy can help builders learn about the benefits of the newer, greener building techniques to help better the environment. For more information regarding the 179D tax deduction and building an energy efficient structure, please contact Claris Energy today.

The post The 179D Tax Deduction: 3 Benefits of Energy Efficient Buildings appeared first on Claris Energy.

As a matter of fact, any expert in this field will tell you that most new constructions and recently remodeled ones will automatically qualify for this federal tax benefit (entirely or partially) by simply meeting current building code requirements, which are much more stricter these days.

Find Out How Your Construction Can Qualify for This Tax Benefit

There are various ways in which you can make a building qualify for the 179D tax benefit. The key is to implement or remodel 3 subsystems that could become eligible for this much-needed incentive: hot water systems or HVAC systems, interior lighting systems and the building envelope, comprising all the elements designed to separate the indoor spaces from the outdoor area. According to most experts, the 179D tax deduction makes more sense from a financial standpoint for buildings with a total surface exceeding 50,000 square feet.

Understanding the 179D Tax Deduction

Here’s what you should know about this tax deduction for energy-efficient commercial buildings:

• The start date was 1/1/2006 and the expiration date was 12/31/2013
• Equipment requirements are not clearly specified, but in order to become eligible for this tax benefit buildings should be able to meet certain energy-reduction targets due to their innovative design or series of improvements reflected by the building envelope, hot water system or heating, ventilation and air conditioning
• The amount of money that you can expect to receive ranges from $0.30 to $1.80/square foot based on the level of energy reduction that is achieved and the technology utilized in the process
• Deductions linked to government constructions go to the designers of the buildings
• The maximum amount of money that you can receive is $1.80 per square foot

As you may already know, the EPAct expired in the last day of the last month of 2013. But this doesn’t mean that all is lost. Contractors, engineers and architects can still go back 3 years and claim their benefits. This means that these categories of experts should inventory the projects that they’ve worked on during the last three years and get the tax benefits that they are entitled to. The IRS requires designers to get an allocating letter from the government; on top of that, engineers, designers and contractors should also count on on-site visits of a licensed engineer who could certify the energy savings that represent the end result of the construction/remodeling work.

To find out more about benefit how you can profit from the 179D tax deduction and various other rebates and financial advantages, just give us a call. At Claris Energy, we work around the clock to offer you unlimited access to info related to green energy that could make your business more eco-friendly and profitable at the same time.

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