Energy-Efficient Tax Incentive

Energy Study for EPAct 179D

A result of the Energy Policy Act of 2005, the 179D program incentivizes taxpayers to increase the energy efficiency of their new construction or renovation projects. The program focuses on three key areas of construction—interior lighting systems, building envelope, and HVAC – and is in effect for work completed after December 31, 2005.  The 179D program was made permanent by the Consolidated Appropriations Act of 2021.

The incentive is based on the analysis of the installed systems as compared to benchmarks designated in the ASHRAE standards. The goal is to achieve a minimum 50% energy savings versus these benchmarks.  For buildings placed-in-service between 1/1/2016-12/31/2020, the designated reference standard is the ASHRAE 90.1 2007 standard.  For buildings placed-in-service after 1/1/2021, the reference standard is the most recent ASHRAE standard published 2 years before the start of construction of said building.

Depending on the actual level of savings attained, a project can achieve a federal tax benefit of a $0.60 to $1.80 deduction per square foot. For projects placed in service after 12/31/20, these amounts are adjusted for inflation annually.

The analysis must be done in compliance with the methodologies outlined in the program, and depending on the scope of work to be evaluated, may include a full building simulation model. As with most tax programs, the benefit is related to the unique facts and circumstances of each individual project. The personal attention each client receives in the “Consult” phase of The Capstan Course will ensure that our team fully understands your unique situation.

Energy Study for 45L Tax Credit

Unlike the 179D tax deduction, the 45L incentive is a tax credit. 45L-eligibility is restricted to for-sale residential homes and residential rental property with a maximum of 3 stories, providing a $2000/unit tax credit for qualifying unit/s. Each unit must be assessed individually to verify the required reduction in energy consumption. Credits can be earned on newly constructed or rehabilitated property.  The Consolidated Appropriations Act of 2021 extended the 45L tax credit through 12/31/2021.

Clients are encouraged to consult Capstan regarding eligibility of past projects and planning considerations for future projects.

 

Services for CPAs

In the face of growing tax code complexity, it’s almost impossible to cover every area with in-house resources. For expertise in understanding and applying the myriad of complexities with the Tangible Property regulations and other IRS Code impacting commercial real estate, turn to Capstan Tax Strategies.

Services for Business Owners

Accelerating depreciation has long been a strategy employed by real estate owners to take advantage of immediate tax savings. The Tangible Property Regulations and the recent Tax Cuts and Jobs Act has created significant opportunities that elevate the many uses of Cost Segregation Studies. Learn how Capstan can help.

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You don’t have to be overwhelmed by Tangible Property and other Fixed Asset Regulations. We help you maximize your tax savings so you can focus on the core of your business.

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