While 2019 was wrapping up, the President signed a new tax deal into law. Here's the good news: it benefits businesses who either completed or want to complete a lighting retrofit.
The tax deal included new regulations for EPAct 179D. We will explain the legislation more thoroughly, but these are the main highlights for commercial buildings:
- Lighting retrofits completed in 2018 and 2019 are eligible for tax deductions
- Lighting retrofits completed in 2020 are eligible for tax deductions
- Commercial buildings could get tax deduction up to $1.80 per square foot
If you completed a retrofit in 2018 or 2019, or you're looking to complete one in 2020, now is the time to get your paper work together for the tax deductions.
What is EPAct 179D?
The Energy Policy Act was created in 2005. It provides tax savings for builders, architects, and engineers who improve energy savings in their new construction or remodel projects.
Section 179D of the act outlines the tax deductions available for commercial buildings. It's a tremendous help to businesses that install energy saving alternatives, like lighting retrofits.
The maximum tax deduction is outline as $1.80 per square foot of the upgraded space.
That’s comprised of three different partial deductions, including $.60 per square foot for interior lighting, $.60 for building envelope improvements, and $.60 for HVAC system upgrades.
You can learn more in detail about EPAct179D here.
Qualifications for EPAct 179D
There are several qualifications your business needs to meet in order to receive the tax deductions outlined in EPAct 179D.
As a general rule, EPAct 179D applies to commercial buildings and apartment buildings four stories or more.
To get full deduction of $1.80 per square foot, energy and power costs need to be reduced by 50%. Partial deductions are also available based on the project and energy reduction.
The building owner qualifies for the deductions, unless the building is owned by the federal, state, or local government. In that case, the company responsible for the system's design may take the deduction.
What does EPAct 179D mean for your business?
The goal of EPAct 179D is to continue to encourage businesses to make capital improvements to their properties.
With the new extensions, your business may be eligible for deductions going back to 2018 if you completed a lighting retrofit.
To be clear, we're not tax experts, but this could result in a significant financial impact for your organization.
If you do not oversee the tax returns for your company, make sure to pass this along to those that do and keep them in the loop.
If you want to start planning your light retrofit for 2020, don't hesitate to contact us. We'd be happy to help you walk through the process.