If you have made significant energy saving upgrades to your building, or are in the process of incorporating energy efficient systems into a new commercial construction project, you may be wondering if you are eligible for tax deductions under the 2005 Energy Policy Act. You may also be wondering how these measures may pay off in both energy cost savings and allowable tax deductions.
The first consideration in qualifying for a deduction is timeframe. In order to qualify for the tax deduction, energy-efficient property must be placed into service between January 1, 2007 and December 31, 2013.
Both partial and full deductions are available, depending upon the degree to which energy and power consumption is reduced. To qualify for the full deduction of $1.80 per square foot, a building owner or tenant must make investments designed to reduce energy costs by 50% or more compared to the ASHRAE Standard 90.1-2001. By upgrading one or two major building sub-systems such as lighting, HVAC or business envelope, you may be eligible to for partial deductions of $.60 per square foot, per upgraded system. Each of these system upgrades should be designed to result in reduced energy costs of 16 2/3% (one third of 50%).
Additionally, Interim Rules apply for lighting systems. Based on the ASHRAE 90.1-2001 lighting power density requirements and use of bi-level switching, lighting upgrades can result in a deduction of $.30 to $.60 per square foot.
The tax deductions provided by the 2005 Energy Policy Act reduce the amount of taxes you owe according to your corporate or personal tax bracket, by reducing your overall taxable income.
Capital Review Group is qualified to provide the certification required in order to qualify for these tax deductions, and is positioned to advise you on how to generate the most savings from your energy efficiency projects.