Tax Incentives for Energy Efficiency Upgrades in Commercial Buildings

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On this page you'll find information about the tax deductions available for improving the energy efficiency of commercial buildings.

The Energy Policy Act of 2005 (EPACT) offered businesses tax deductions for the costs of improving the energy efficiency of commercial buildings. The Emergency Economic Stabilization Act of 2008 extended provisions in EPACT. The following tax incentives are available under this act.

Deduction of the Cost of Energy-Efficient Property Installed in Commercial Buildings

A tax deduction of up to $1.80 per square foot is available for buildings that save at least 50% of the heating and cooling energy of a system or building that meets ASHRAE Standard 90.1-2001 (for buildings and systems placed in service before January 1, 2016) or 90.1-2007 (for buildings and systems placed in service before January 1, 2017). Partial deductions of up to $.60 per square foot can be taken for measures affecting: the building envelope, lighting, or heating and cooling systems. For more information, see the 179D Commercial Buildings Energy Efficiency Tax Deduction page.

Extension of Energy Investment Tax Credits

The 30% investment tax credits (ITC) for solar energy and qualified fuel cell properties are extended to January 1, 2017. The 30% ITC now also applies to qualified small wind energy property. The cap for qualified fuel cells increased to $1,500 per half kilowatt of capacity. Finally, a new 10% ITC is available for combined heat and power systems and geothermal heat pumps.

Accelerated Depreciation for SmartMeters and Smart Grid Systems

Currently, taxpayers generally recover the cost of smart electric meters and smart electric grid equipment over a 20-year period. This act allows taxpayers to recover the cost of this property over a 10-year period, unless the property already qualifies for a shorter recovery schedule.

Additional Resources

The following sites and publications will provide additional information.

Note: Every effort is made here to provide accurate information on these tax incentives; however, a tax professional should be consulted on questions for specific situations.