Surprise Savings and Huge Smiles – The Benefits of Section 179D Tax Deduction

What if we tell you that you might be sitting on tax savings worth millions and know nothing about it? Well, before telling us to wake up, you need to know about Section 179D tax deductions, or the Epact 179D Tax deduction. Constructions which include energy improvements installed in the last few years are entitled to collect their accrued tax deductions under Epact Energy policy Act of 2005 as provided by a new IRS Revenue procedure (2011-14).

Section 179D Tax Deduction

The Rev. Proc. 2011-14, allows availing deductions for installations and improvements without any amendment being required

As per the latest ruling, the gaining parties, namely

  • Commercial property owners,
  • Leaseholders, and
  • Designers of government buildings can adjust their current year’s income with an amount corresponding to the deductions and expense and include their adjusted figures on their current tax return.

The Provisions

  • A tax deduction of $1.80/sq. ft. is available under Section 179D for energy improvements which enable a building to reduce consumption by 50 per cent or more when compared to a 2001 ASHRAE qualifying parameter in systems such as HVAC, lighting etc.
  • Only construction completed and ready for use by 2013 is applicable for such deduction.

Benefits to other parties

Architects, designer and engineers also get a piece of the cake. As the government does not pay any tax, so the benefits of environment friendly measures in government establishments were wasted prior to 2008. Now, however, the Epact has been amended till 2013 and will include a provision for all public building tax benefits to be provided to the architect, engineer, contractor or any other credible source for the specifications. These professions have been benefitted almost $25 million with such a gallant step from the government. The professionals have received this change with a warm welcome and have become motivated to incorporate an element of eco-friendliness in their designs.

Section 179D Tax Deduction

Research shows that fewer than 5 percent of eligible buildings’ owners or leaseholders have been able to optimally utilize these benefits offered by the government. This is a great initiation process and it is now up to the entrepreneurs and owners who have done most of the hard work to gain knowledge about such provisions and optimally benefit from them.


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