Secure Your Section 179D Deduction
Section 179D Energy Efficient Commercial Buildings Deduction
Section 179D In Detail
Section 179D was created and implemented as part of the Energy Policy Act of 2005, in acknowledgment of the significant role commercial buildings play in U.S. energy consumption. The federal government sought to reduce energy consumption by incentivizing the design and construction of energy efficient buildings.
The Section 179D tax incentive allows the building owner to deduct from the costs of energy efficient improvements in three areas:
- Building envelope
- HVAC and hot water systems
The Section 179D incentive can be used not only for new construction, but for upgrades and retrofits as well.
We’ve discussed the types of energy efficient improvements that qualify for the incentive. However, not every energy efficient building is eligible. For example, residential single-family homes do not fall under Section 179D.
To be eligible for this Section 179D tax deduction, there are a few factors which need to be taken into consideration, including:
- The building must be within the scope of Standard 90.1-2001, which means that it is:
- Primarily used for commercial purposes;
- Used for industrial purposes;
- Dormitory building;
- Converted from other uses to be a commercial building;
- Unconditioned garage spaces.
Some of the qualities and factors that might prohibit a building from qualifying for the deduction include:
- Single-family homes;
- Multi-Family homes with three or fewer stories;
- Manufactured houses;
- Buildings that do not use electricity or fossil fuels;
- Religious buildings (as they are already tax-exempt).
Claiming the Section 179D Deduction
An individual taxpayer cannot prepare the claim on their own. A licensed engineer must complete a certification to validate the savings claimed on behalf of the owner.
The following is required by the IRS in order to claim the deduction:
- Third-Party Inspection, Verification and Certification in accordance with Section 179D of the Internal Revenue Code
- Energy modeling w/ DOE approved software
- Allocation Letter (public buildings only)
The process of performing a Section 179D study tends to take between 4-6 weeks, and you can speed that up by getting the right kind of help on your side early on. There is certainly a strong argument for working with an experienced, trusted and valued speciality tax provider that specializes in engineering based incentives. With their help on your side, you will have considerably less stress associated with trying to claim on Section 179D, and you are much less likely to run into problems as you claim your tax benefit.
At Tri-Merit, we are highly experienced professionals in the field of engineering based tax incentives, including Section 179D. We can help you work out whether you are eligible and assist you throughout the entire process.
We will gather data and provide a no-cost feasibility analysis. If you decide to move forward, we will follow IRS-prescribed inspection and modeling criteria to validate energy savings and potential tax deductions. Upon completion, we will provide the required third-party certification report.
Give Tri-Merit a call today and take advantage of your energy efficient improvements in every way possible.