One of the measures employed to motivate building owners and developers to incorporate environmentally friendly building systems is to provide them with tax credits that they can use as savings or reduce their tax liabilities. New buildings with green systems in lighting, insulation, HVAC, and plumbing qualify for the tax credits. Still, even old buildings that have been remodelled to comply with the new standards on green buildings can also be eligible for the 179D Tax Credits. Property owners can take advantage of this tax credit, and building designers who designed the building systems can be given the tax credit. The EPAct 179D tax deduction is available to commercial building owners and designers of public building projects incorporating specific sustainable building components. As energy costs rise, most public and private organizations prioritize cost reduction through efficient and environment-friendly systems. The Energy Policy Act (EPAct) 179D tax deduction provides up to $1.80 per square foot for installing systems that reduce total energy and power costs by 50% compared to a building meeting ASHRAE Standard 90.1-2007 minimum requirements. The bigger the building, the more efficient its energy and power systems are, and the more tax deductions can be realized. Although developing a green building is costly, as the more sustainable measures are still expensive in the market, it will significantly reduce power and energy costs in the long run. Additionally, the owners can enjoy tax deductions, an excellent incentive for those who commit to going green. To qualify for the tax credits, the building envelope, interior lighting systems, heating, cooling, ventilation, and hot water systems should be outfitted with efficient and sustainable strategies that use less power and minimizes the carbon footprint.
What are the requirements for the 179D Tax Credits?
Applying for 179D tax credits is not complicated; the property owner just has to demonstrate that their building systems were designed to reduce power and energy consumption by 50 percent or more when compared to the older standards. This would mean having your building plans recognized and certified by the IRS to this effect and requesting a letter of allocation for the 179D tax credits. After which, you can include the letter of share of the tax deductions in your tax filings for a given year. But before you can do that, you would need to have your documents and building plans inspected to ensure that they will pass the scrutiny of the IRS. Doing this means hiring an external company or firm to represent you in this matter. They will ensure that your documents are in order; if not, they will help you prepare the documents and forms. They will also submit the documents to the IRS for inspection or audit, and they will be there to assist you in every step. Once your building plans have been certified by the IRS, they will request the letter of allocation on your behalf and will work with you in filing your taxes to realize the savings you can get from the 179D tax credits. These firms work by IRS guidelines, and the tax deductions are directly awarded to the property owner and not to the firm; their job is to maximize the savings you can get from the tax deductions. If you are unsure whether your property meets the requirements for the tax credit, ask for a consultation with the firm, and they will tell you whether your building is eligible or not.
What type of building qualifies for 179D Tax Credits?
Not all properties can qualify for the 179D tax credits, such as single-family homes, residential buildings of three or fewer levels, non-profit, manufactured homes, and those that do not have substantial power usage. Buildings that are eligible for the tax credit are those that have been in service after December 2005, it has to be located in the United States, and the systems installed include lighting, HVAC, building envelope and hot water systems, the energy and power consumption calculation was derived from the IRS software and had been compared to the previous building standards, and must be certified by the IRS engineers and experts.
How does a building designer qualify for 179D Tax Credits?
Sometimes, the building owner is not eligible for the 179D tax credits. However, the building designer of the power and energy-efficient systems can be allocated the tax credits. The building designer can be the engineer, architect, and environmental consultant who designed the building systems to comply with the new EPA provisions. To qualify for the tax credit, the designer needs to submit the building plans and design to the IRS and have it certified, and then a letter of allocation for the tax credits is assigned to the designer. When the designer files their taxes, they can use the funding letter to receive the benefits.
Where to find consultants to help with 179D Tax Credits?
The 179D tax credits have become a permanent tax deduction by the EPA law, which is a massive motivation for building developers as the benefits can be claimed yearly. However, few building owners know about the tax credits; they have been there for years but are underutilized because there is little knowledge of them. For this reason, it is best to hire the services of a firm that will ensure that you can claim the tax credits for your energy-efficient building. There may be several firms that can help you with this, but getting the best in the area will be to your advantage. You must ensure that the firm has the experience and expertise in handling this tax credit. They should have a team of experts that will honestly tell you whether you qualify or not and what alternatives are available to you, such as partial tax credits if you do not meet the 50 percent criteria. If you cannot find a firm in your locality, you can try finding one on the internet that can work all over the country.
