Common Questions about Federal Energy Tax Deduction

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The Energy Efficient tax deduction IRS 179D has been one of the most important energy saving and environmentally friendly IRS rulings in a long time. The tax deduction is designed to ensure that commercial building owners who comply with the efficient energy requirements are rewarded for their hard work.

Here is a list of some of the common questions about Federal Energy Tax Deductions.

What Qualifies For The Deduction?

There are a few different types of commercial entities that can avail the energy efficient tax deductions. They are outlined below:

  • Commercial Renovations and Retrofits
  • Commercial Buildings
  • Public Buildings – Buildings owned by local, state or federal government may pass the 179D tax deduction to contractors, engineers, energy consultants or the architect. The recipient must have worked on the building.
  • Residential buildings that have more than 3 stories.
  • However, any organization owning a building that does not pay the federal taxes is ineligible to enjoy the tax deduction

How much will my tax deduction be?

The biggest tax deduction available for energy efficiency in a commercial building is up to $1.80 per square foot. If a building only partially qualifies for the 179D Tax Deduction, each of its system can earn the following tax deductions:

  • HVAC efficiency gets a deduction up to $0.60 per square foot
  • Lighting efficiency gets a deduction of up to $0.60 per square foot
  • Building envelope gets a deduction of up to $0.60 per square foot

What Requirements Make You Eligible For These Deductions?

There is an ASHRAE 90.1-2001 standard that dictates the energy efficient levels of lighting, building envelope, and HVAC. A 50% reduction in a retrofitted or new commercial building according to the standards mentioned will make the entire building qualify for 179D tax deduction. If the overall reduction is less than that, each system may qualify for the components of the tax deduction.

Are There Some Specific Qualifying Requirements?

  • The building which is being used to claim the tax deduction needs to be in the United States
  • The building must be within the scope of ASHRAE 90.1
  • The building needs to have been put into service after the 1st of January 2006