Capital Review Group: Are You Ready to Take Advantage of the New Green Tax Incentives?

INTRODUCTION

The Energy Policy Act of 2005 includes a tax deduction for investments in "energy-efficient commercial building property" designed to significantly reduce the heating, cooling, water heating, and interior lighting energy cost of new or existing commercial buildings. This energy-efficient commercial building property must be placed into service between January 1, 2006 and December 31, 2013.

If you are a building owner or a tenant/lessee who has paid for energy efficient construction or improvement projects, you may be eligible for a tax deduction of up to $1.80 per square foot for improving the energy efficiency of your existing commercial buildings or designing high efficiency into new buildings. For government owned buildings, the person primarily responsible for designing the building or project may be able to claim the deduction.

To qualify for the full deduction, a building owner or tenant must make investments designed to reduce energy costs by 50% or more. A partial deduction of $.60 per square foot is available for investments in one of three subsystems - lighting, heating and cooling; or building envelope - designed to reduce energy costs by 16 2/3% (one third of the 50% requirement). Or per IRS Notice 2008-40 replacing 16 2/3% with 20% for Lighting, 20% for HVAC and 10% for Envelope OR Per Notice 2012-22 applying 25% for Lighting, 15% for HVAC and 10% for Envelope.

It is important to remember that tax deductions reduce your overall taxable income with the value of the deduction dependent upon your tax bracket. Tax credits - such as the ones provided for consumers in the 2005 Energy Policy Act reduce the amount of tax you owe dollar for dollar.

Download the entire article on Green Tax Incentives. 

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