Going Green? Earn Tax Breaks for Saving Energy

Vietnamese engineer discussing building blueprint with contractor when they are working on project at construction site

Feel even better about reducing your carbon footprint when you take advantage of the significant tax savings found under 179D and 45L.

In addition to being environmentally friendly, energy-saving properties more often attract modern residents for their “green” stamp, and better retain their value over time. There are two specialty tax benefits that reward eligible building contractors, potentially saving them tens of thousands in tax liabilities. 179D is a tax deduction for commercial building owners and primary designers. 45L is a credit for energy-saving properties that stand at three stories or less.

179D: A Deduction Rewarding Energy Efficiency

Your building does not have to be brand new in order to benefit from this tax perk. Both newly constructed and renovated buildings that have installed energy-saving elements qualify under this tax provision. Ideal candidates for the 179D deduction are commercial building owners, architects, design firms, and groups that have government building contracts.

Even if you have just upgraded one element throughout your properties such as lighting, you may still qualify for a portion of the $1.80 per square foot deduction. Moreover, this tax policy was extended through the end of 2020, which opens an opportunity for businesses to retroactively claim 179D for the 2018 & 2019 tax years.

45L: A Tax Credit for Energy Efficient Homes

Eligible building owners, contractors and developers that reduce energy use by at least 50% can claim the 45L tax credit, which awards applicants with $2,000 in tax credits for each dwelling unit. New energy-efficient systems and installations built or significantly reconstructed from August 5, 2005 to December 31, 2020 are applicable. The credit can be especially valuable for owners of apartment or condominium buildings because each unit is eligible for its own credit.

Furthermore, the 45L tax credit can be retroactively claimed for residential and apartment buildings in the last three years, and any unused credit can be claimed for up to 20 years in the future. Ideal candidates are residential building developers with multiple properties, but any developer, builder, or homeowner may qualify.

What is the first step to claiming my deductions?

A site visit by an independent, qualified party is required to verify the installation of the property’s energy-efficient elements. Certifications must be obtained to verify that the home meets specific government-issued requirements. To get started on your claims, work with a trust tax team who can walk you through every step of the process. To find out if your properties pre-qualify, contact National Tax Group at (561) 257-3436 to claim your free tax analysis report.


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