Critical Time Window for Federal Energy Efficiency Tax Incentives

by Wayne Haggstrom, Capital Review Group

SolarPanelsThe IRS tax code that provides federal tax incentives on energy improvement investments, §179D, expires at the end of 2013. While energy efficiency upgrades need to be completed by Dec. 31, 2013, to qualify, opportunities exist in two areas: accelerating future projects into 2013 and reviewing projects dating back to Jan. 1, 2006, that resulted in energy savings. Either of these can allow the building owner, occupant or designer to qualify for the deduction.

§179D of the Internal Revenue Code supported by the Energy Policy Act of 2005 includes full and partial tax deductions for investing in commercial building improvements that are designed to increase the efficiency of energy-consuming functions such as lighting, HVAC and building envelope. The deduction available is up to $.60 per square foot for each function — a potential for $1.80 per square foot if all three components or subsystems qualify. Factors that need be taken into consideration are whether the building owner can take the deduction and whether the project qualifies.

To take advantage of the allowable deduction for energy saving projects, consider accelerating future projects into 2013. Also, review projects completed since Jan. 1, 2006. Energy improvements may have resulted from a renovation that improved lighting and/or cooling efficiency, an upgrade to mechanical equipment as part of a maintenance program and/or improvements to the building envelope. This deduction may be taken on renovations and retrofits to existing buildings as well as new construction. §179D requires a reduction in annual energy and power consumption per subsystem (listed above) to the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) Standard 90.1-2001.

And as we head into this year’s tax season, it can be beneficial to review those energy projects completed since Jan. 1, 2006, for any incentives that may apply.

Capital Review Group

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