The majority of people who own buildings are experienced business people who have intentions of maximizing the return on investment (ROI). As surprising as it may be, only a few of them attempt to enhance the ROI through reduction of operating costs as well as reduction of tax obligation.
As energy prices continue to rise, some of the logical ways of reducing energy expenses include installing energy-efficient lighting and heating/cooling systems. The State of California, for instance, has the largest energy efficiency program with utility rebates on efficient air conditioning and lighting, covering almost 15 to 20 percent of the entire replacement costs.
New York along with New Jersey are also launching energy efficiency programs on a large scale, whereas some states such as Nevada and Oregon are in the midst of introducing considerable rebates for replacement lighting.
The Federal government has a program that offers accelerated depreciation of any installed energy efficient equipment. The Section 179D of Internal Revenue Code offers immediate tax deductions for all energy-efficient projects put into service from January 2006 through to December 2013. This allows the owners of buildings to claim deductions.
How Does It Work?
Owners of commercial buildings with energy efficient equipment are eligible to claim a deduction amounting to $1.80/square-foot. For instance, a 200,000 square-foot building can result in tax deductions worth $360,000 on the basis of 39-year property equal to the deduction.
The following equipment features can qualify a building for tax deductions:
- HVAC systems
- Lighting controls and systems
- Building envelope
Besides 179D deductions, owners of buildings can also qualify for rebates as well as tax incentives for buying energy efficient components and equipment. With rebates ranging from 20 to 50 percent, it is surprising why so few building owners take advantage of this to enhance their ROI.
For more information on how you can apply Section 179D deduction to your taxes, check out our process here