Tax Deductions for Improving Energy Efficiency in Commercial Buildings.

27 Apr 2010

Under the Energy Policy Act of 2005, owners and tenants of new or existing commercial buildings are eligible for a tax deduction for improving their building’s energy efficiency.

The tax deduction is applicable to commercial buildings which reduce energy costs associated with three components: (i) interior lighting systems, (ii) building envelope, and (iii) heating, cooling, ventilation and hot water systems.  Buildings which reduce the total annual energy costs across all three system components by 50% or more in comparison to a reference building that meets the minimum requirements of ASHRAE Standard 90.1-2001 are eligible for a tax deduction of $1.80 per square foot.  Partial deductions of $0.60 per square foot can be taken for improvements to one of the three building systems that reduce energy use by a certain percentage — the building envelope (10%), lighting (20%), or heating and cooling system (20%).

The deductions are available for buildings or systems placed in service from January 1, 2006, through December 31, 2013.  The entity that makes the expenditures is generally the recipient of the deduction.

If you are considering new construction or a significant renovation, it only makes sense to take advantage of this deduction.

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