Energy Efficient Building Deduction
An immediate expensing deduction is allowed for energy efficiency improvements to lighting, heating, cooling, ventilation, and hot water systems of commercial buildings. This includes a $1.80 deduction per square foot for construction on “qualified property.” As an alternative, a partial $0.60 deduction per square foot is allowed if certain subsystems meet energy standards but the entire building does not, including the interior lighting systems, the heating, cooling, ventilation, and hot water systems, and the building envelope.
New Law: The Disaster Act extends these deductions to property placed into service before Jan. 1, 2021. (Code §179D(h), as amended by Disaster Act Sec. 131)
Comment: As enacted under The Energy Policy Act of 2005, the Sec. 179D energy tax deduction for “building envelope efficiency” encourages building owners to “build green” to not only reduce their utility bills on a carry-forward basis, but also to reduce their tax liability on their tax returns as well.
Dr. John Connors, JD, CPA, LLM
Tax Educator’s Network, Inc.
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