Recent passage of the Bipartisan Budget Act of 2018 retroactively extends several tax breaks through 2017 including the §179D Energy-Efficient Commercial Buildings Deduction and the §45L Energy-Efficient Home Credit. Both incentives are intended to offset the costs associated with building energy-efficient properties.
Section 45L provides a dollar-for-dollar offset against taxes owed or paid in the tax year in which a single-family or multifamily property is sold or leased.
Residential building owners such as developers or contractors can qualify for a tax credit of $2,000 per qualifying unit based on the energy reduction requirements and type of building.
The credit for a manufactured home is $1000.
Taxpayers have 3-years to capture any missed properties that qualify for the credit.
Section 179D provides a tax benefit of up to $1.80 per square foot for buildings that reduce the total energy and power costs by 50 percent or more compared to ASHRAE 90.1-2007 standard.
A deduction of $0.60 per square foot is available for each partial qualification of lighting, HVAC, and envelope systems.
Commercial building owners and designers (architects, engineers, contractors, etc.) of government buildings qualify for the deduction.
New construction and renovation projects may qualify for the deduction.
Commercial building owners can claim the deduction for projects placed in service after January 1, 2006 by filing a Form 3115. Designers can claim the deduction for projects placed in service in the past three years on amended tax returns.
The IRS requires that a §179D study be conducted by a professional engineer or contractor licensed in the same jurisdiction as the proposed building and that a §45L analysis be conducted by a certified third party using IRS-approved modeling software.