Fabulous Tax Incentives for Energy Efficient Commercial Buildings – Sobieski Services | DE, NJ, PA, MD

Fabulous Tax Incentives for Energy Efficient Commercial Buildings

Building owners and managers who want to improve the energy efficiency of their commercial buildings may, at first, believe that the investment is too high. While it is true that achieving energy efficient commercial buildings will require an appreciable investment in equipment, supplies and retrofits, the truth is that an energy efficient building will repay that investment many times over. For those who are looking at efficient upgrades for their commercial buildings, there are also several different tax incentives available that can help offset the costs of investing in energy efficiency. The following list describes some of those tax incentives and how they can be used in creating energy efficient commercial buildings.

The Nature of Efficiency Tax Incentives

Federal tax incentives for energy efficiency upgrades and related programs are usually designed to be applied to a company’s federal tax obligations. The amount of these incentives can be deducted from the amount that a participating company owes in federal taxes. For specifics on how and when to take deductions or apply tax incentives, contact your account or tax specialist.

The Benefits of Energy Efficiency

The most notable benefit of turning your building into an energy efficient structure is in the amount of money you pay every month for energy. By boosting energy efficiency, you can slash your monthly heating and cooling costs by a significant percentage, sometimes 50 percent or more. You can trim your costs for lighting and make it less expensive to run necessary equipment, tools or electronic devices.

Many energy efficient upgrades, such as those obtained through the use of high-efficiency HVAC equipment, can often pay for themselves within a few years through the monthly savings they provide on heating and cooling costs. This alone can make a substantial energy efficient upgrade very attractive. However, when you factor in the tax savings available through various federal, state and local agencies, the savings become even more significant.

Federal Tax Incentives for Energy Efficiency

Federal tax incentives for energy efficiency originated in the Energy Policy Act of 2005, which provided tax deductions for business that improve the energy efficiency of their buildings. The provisions of this act were extended in 2008 by the Emergency Economic Stabilization Act. Some of the more notable federal tax incentives for energy efficient commercial buildings available under these acts include the following:

  • Energy-efficient property deduction: A tax deduction of up to $1.80 per square foot of property space can be applied for buildings that save at least 50 percent of the heating and cooling energy meeting ASHRAE Standard 90.1-2001. Partial deductions of $0.60 per square foot can be taken for energy efficient upgrades and procedures that affect lighting, the heating and cooling systems and the building envelope. Retrofits of existing buildings can also qualify for the deduction. The deductions can be applied through December 31, 2013.
  • Energy investment tax credit extensions: Investment tax credits (ITC) of 30 percent for solar energy and specific qualified fuel cell properties have been extended to January 1, 2017. These 30 percent credits can also be applied to qualified properties that use small wind energy systems. A 10 percent investment tax credit is available for geothermal heat pumps and for combined heat and power systems. The credit cap for qualified fuel cells is currently at $1,500 per half kilowatt of capacity.
  • SmartMeter and smart grid accelerated depreciation: The depreciation period for recovering costs of smart electric meters and smart electric grid equipment is now 10 years, compared to the previous 20-year period. Properties that qualify for shorter recovery schedules will still be able to apply that shorter depreciation schedule.

Our goal is to help educate our customers about Plumbing, HVACR, Fire Protection and Alarm Systems in Mechanical, Commercial and Residential settings. For more information on tax incentives for energy efficient commercial buildings, and to view projects we’ve worked on, visit our website.

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