The Consolidations Appropriations Act of 2021 signed into law on December 27, 2020 permanently extended the 179D tax deduction for energy efficient building improvements. This is great news for commercial building owners as they can now take advantage of the 179D tax deduction for energy efficient building upgrades without wondering if and when the deduction will expire. Below we dive into the details to know before taking advantage of the 179D deduction.
BACKGROUND ON 179D AND ELIGIBILITY
The 179D deduction helps incentivize energy efficient construction projects. This deduction was originally created as a temporary measure under the Energy Police Act of 2005 and was extended every year until it expired in 2017. A tax deduction of $1.80 per square foot that reduced the building’s total energy and power cost by 50% or more is available to owners of new or existing buildings who install the following:
- Interior Lighting
- Building Envelope
- Heating/Cooling Ventilation
- Hot Water Systems
Deductions of $0.60 per square foot are available for situations where expenditures partially qualify by meeting certain target levels or through an interim lighting rule issued by the IRS. For government-owned buildings, this deduction is transferable to the person or company responsible for the energy efficient design. Therefore, architecture and engineering firms that design government owned buildings may also claim this deduction when completing additional requirements.
Under the extender bill of 2019, the deduction is retroactively extended for tax years 2018, 2019 and available for 2020. Qualified buildings placed in service in 2018 and 2019 may be eligible to claim the 179D deduction.
CLAIMING 179D
Eligible building owners can claim the 179D deduction for up to $1.80 per square foot of the entire building for the installation of energy efficient systems into new or existing buildings.
The Anders Real Estate and Construction Group can help determine if your construction project would qualify for the 179D deduction as well as other tax credits and incentives. Contact an Anders advisor below to learn more.
