Under the Energy Policy Act of 2005, you may qualify for the Internal Revenue Code §179D energy efficient tax deduction on construction or capital improvement costs designed to increase a building’s energy efficiency. This deduction is available for private or commercial buildings, as well as public schools, federal, state, local government, municipality, and military buildings.
Private/Commercial Buildings
In private or commercial buildings, the building owner or tenant benefits from this tax deduction. Specifically, the owner of the installed energy efficient assets benefits. Lighting, HVAC, building envelope, and whole building project types qualify for this deduction.
To claim this deduction, the owner of the installed energy efficient assets must obtain energy modeling with Department of Energy approved software and a third-party inspection, verification, and certification in accordance with §179D of the Internal Revenue Code. Additionally, the energy efficient property must have been placed in service on or after January 1, 2006.
Public Schools/Federal, State, Local Government/Municipality/Military Buildings
In public schools, federal, state, or local government buildings, municipal buildings, and military buildings, there are separate criteria for the §179D deduction. Here, the primary designer, architect, engineer, or contractor benefits from the deduction. Lighting, HVAC, building envelope, and whole building project types qualify for this deduction as well.
To claim this deduction, the following are required: third-party inspection, verification, and certification in accordance with §179D of the Internal Revenue Code; energy modeling with Department of Energy approved software; and an allocation letter from a government entity. This deduction is available for the three prior years as long as these prior-year returns are amended.
Deduction Amount
For more information on what the §179D deduction could mean for you or your business, contact the qualified attorneys at Rock, Fusco & Connelly.