Business Owners - Reinstated Provisions

Energy tax incentives Sections 179D and 45L of the Tax Code, have been retroactively reinstated for projects placed in service between Jan. 1, 2018 through Dec. 31, 2020.

The Energy Policy Act of 2005, the section 179D energy tax deduction for building envelope efficiency encourages building owners to “build green”.

This would not only save money by reducing utility bills on a carry-forward basis, but also reduce tax liability on the business owners tax returns as well.

How does it work? Under Section 179D, eligible commercial building owners can take a federal-level tax deduction of up to $1.80 per square foot of the building’s envelope if they install property that reduces energy and power costs. A building envelope is the physical separator between the conditioned and unconditioned environment of a building including the resistance to air, water, heat, light, and noise transfer. These installations need to be part of the building’s interior lighting systems (i.e., up to $0.60 per square foot); heating, ventilation and air conditioning systems (i.e., $0.60 per square foot for newly installed HVAC equipment); or building envelope (i.e., $0.60 per square foot for windows, doors, roofs or insulation).

Under Section 45L, eligible contractors can take a federal tax credit of $2,000 for each energy-efficient dwelling unit, which can certainly have substantial value in the aggregate.

There are specific attributes that need to be present in order to qualify for this incentive. For example, a three-story building above grade or less (not including below-grade parking) and some energy-efficient features, such as wall insulation R-13 thru R-19+; roof insulation R-38+; double- and triple-pane windows; vinyl low E windows; insulated exterior doors; reflective roofing materials; extra insulated foundations and slabs; air conditioning with SEER ratings 13+; 80 percent + efficiency gas furnaces; or hydronic heating systems.

The new Act successfully addressed many tax incentives that were not properly addressed or extended within the Bipartisan Budget Act of 2018 and the Tax Cuts & Jobs Act of 2017.

[See VoicesTax provisions in appropriations bills include extenders and repeals

By Peter J. Scalise]

To determine the scope and application of these newly passed tax laws and their effect on your tax return give us a call 708-862-1294 or refer to the bill. It's good reading:




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