Sometimes we get so involved with CPA firms when discussing 179D that we forget to assess the potential of the deductions.
Here are some questions that you should always ask your clients to determine whether or not a study would be feasible for them:
What types of improvements have been made to your building?
Section 179D is applicable to energy-efficient improvements in three major categories. Because the deduction depends on the square footage of a structure, you need to determine how big their space is – smaller spaces might not justify the costs associated with a study.
Their improvements should fall into any one or more of these categories:
- Building Envelope
How much did the improvement work cost you?
The amount of deduction also depends on the amount spent on the improvements. Make sure the amount spent is sizable enough before committing to conduct a study.
What are the energy-efficiency ratings of the materials you removed and of those that you installed?
The professional engineer who reviews the improvements will report this. The client should have sufficient information about the new systems to ensure the calculation of energy improvement is accurate.
Determining whether or not a 179D study is feasible for your client can easily eliminate or highlight the potential benefit. The 179D deductions aren’t always enough to overcome the costs of a study – in such cases, a 179D study would not be recommended. These questions will help you determine.