New Tax Deductions for Energy Efficient Property Owners/Leaseholders

In recent years, energy efficiency has become a hot topic.

Not only does it reduce waste and help the environment, but it also reduces the costly energy bills and expenses that plague the real estate industry. Thanks to the Energy Policy Act of 2005, there is now another reason to invest in energy efficiency. Now qualifying real estate owners and leaseholders of commercial real estate are also able to reduce their overall tax liability. Taxpayers who own or lease a commercial building and install energy efficient components, including interior lighting systems, heating, cooling, ventilation, and hot water systems, generally qualify for the Section 179d deduction.

Deduction Benefit

The amount of the deduction is generally $1.80 per square foot of building floor area for buildings that achieve a 50% reduction in energy and power costs. Buildings that achieve a reduction in energy and power costs of less than 50% may qualify for a deduction of $0.60 cents per square foot of building floor area if the building achieves a reduction in energy and power costs of 16⅔%. In order to qualify for the deduction, a certification must be obtained to verify that the property installed satisfies energy efficiency requirements and can demonstrate that required energy savings will be achieved.

Additionally, the Department of Energy will create and maintain a public list of software that must be used to calculate energy savings for purposes of providing the certification.

Contact Us

If you are a commercial property owner or leaseholder and have recently installed energy efficient systems, you could benefit from this new tax provision. In the event you are considering adding such equipment, let’s discuss the expected benefits and certification process. To learn more please contact us at (303) 388-1010 or click here to contact us. We are here to help.

Real Estate, TaxScott Norquist