IRS Section §179D
IRS §48 Clean Energy Investment Tax Credit
IRS Section §179D
Energy Efficient Commercial Building Tax Deduction.
Offers up to $5.65 per square foot in tax deductions for energy-efficient improvements in commercial and multifamily buildings (4+ stories).
- Covers upgrades to HVAC, lighting, and building envelope systems.
- Available to building owners and architects, engineers, and designers of government
Energy Efficient Commercial Building Tax Deduction.
Offers up to $5.65 per square foot in tax deductions for energy-efficient improvements in commercial and multifamily buildings (4+ stories).
- Covers upgrades to HVAC, lighting, and building envelope systems.
- Available to building owners and architects, engineers, and designers of government-owned buildings.
The §179D Tax Deduction permits owners of commercial buildings, as well as designers of buildings owned by public entities and tax-exempt organizations, to claim a tax deduction for installing qualifying energy-efficient systems.
IRS Section §45L
IRS §48 Clean Energy Investment Tax Credit
IRS Section §179D
Energy-Efficient Apartment /Condo /SFR Tax Credit
Up to $5,000 per unit in tax credits are provided for energy-efficient residential and multifamily (apartment) buildings (under 4 stories).
The §45L program allows builders, contractors, and developers to claim tax credits for designing and constructing energy-efficient homes.
To qualify, pr
Energy-Efficient Apartment /Condo /SFR Tax Credit
Up to $5,000 per unit in tax credits are provided for energy-efficient residential and multifamily (apartment) buildings (under 4 stories).
The §45L program allows builders, contractors, and developers to claim tax credits for designing and constructing energy-efficient homes.
To qualify, projects must meet ENERGY STAR® or Zero Energy Ready Home (ZERH) standards.
IRS §48 Clean Energy Investment Tax Credit
IRS §48 Clean Energy Investment Tax Credit
IRS §48 Clean Energy Investment Tax Credit
Tax credit of 30% to 70% for renewable Energy- Efficient Tech investments
Qualifying Energy Technologies
Bio-gas, Combined Heat and Power (CHP), Systems Electrochromic Glass, Energy Storage/
Batteries, Fiber-Optic Solar Lighting, Geothermal Heat Pumps, Geothermal Systems, Qualified
Fuel Cells, Qualified Microturbine Systems, Small Wind Ener
Tax credit of 30% to 70% for renewable Energy- Efficient Tech investments
Qualifying Energy Technologies
Bio-gas, Combined Heat and Power (CHP), Systems Electrochromic Glass, Energy Storage/
Batteries, Fiber-Optic Solar Lighting, Geothermal Heat Pumps, Geothermal Systems, Qualified
Fuel Cells, Qualified Microturbine Systems, Small Wind Energy Systems, Solar Energy Systems,
and Waste Energy Recovery.
No Tax Liability? A business with no income tax liability due to losses or incentives, can convert the credit to cash:
by completing the registration process, finding an unrelated buyer, and reporting the transaction on your tax return.
Tax-Exempt? Tax-exempt entities can receive direct cash payments by: registering on the portal, filing a return to
claim the payment, even without prior filings.
Overview IRS Section 179D, up to $5.65 sq/ft tax deduction
Who is Eligible to Claim:
- Commercial and Residential Building Owners
- Real Estate Developers
- Real Estate Investment Trusts (REITs)
- Designers: Architects, Engineers, General Contractors, Environmental Consultants, and Energy Service Providers.
Highlights:
- Tax deductions range between $1.88/sq. ft. to $5.65/sq. ft.
- Deductions are available for new construction or renovation, including inter lighting, building envelope, and HVAC.
- For government entities and nonprofits, 179D can be allocated to an eligible designer.
Impact of IRA (Inflation Reduction Act) :
The Inflation Reduction Act of 2022 improved 179D by adding eligibility,
increasing the deduction to $5.00 per sq.foot, and removing the lifetime cap.
Overview of IRS Section §45L up to $5,000 Tax Credit per uni
Eligible Building Types:
- Multi-Family (Apartments)
- Condominiums
- Apartment Buildings
- Assisted Living Facilities
- Dormitories
- Single Family Homes
These changes apply to newly constructed or retrofitted dwellings leased or sold after January 1, 2023. The credit has a 3-year look-back period and can be carried forward for up to 20 years.
HIGHLIGHTS:
- Projects must meet ENERGY STAR® or Zero Energy Ready Home (ZERH) standards to qualify.
- The energy savings must be certified by a qualified third party, such as a Residential Energy Services Network (RESNET) Home Energy Rater or an equivalent.
- It can be combined with other federal, state, and local energy efficiency incentives, potentially enhancing the overall financial benefits for developers and builders.
HOW DO YOU KNOW IF YOUR BUSINESS QUALIFIES FOR 45L?
- Have you built or developed multi-family or single-family homes?
- If you purchased a building, did you make energy-efficient retrofits?
- Have you built or renovated these buildings in the past 3 years?
- Is your building more than 20 units?
Impact of IRA (Inflation Reduction Act) :
The Inflation Reduction Act has revised the 45L tax credit in several significant ways. It has increased the credit amounts, changed the certification process from RESNET to either Energy Star or Zero Energy Ready Home (ZERH), removed the restriction on building height (previously limited to three stories), eliminated the reduction in basis for the Low-Income Housing Tax Credit (LIHTC), and introduced a requirement for local prevailing wages.
Overview IRS Section §48 Clean Energy Investment Tax Credit
Who is Eligible to Claim:
- Section §48 offers a 30% to 70% tax credit for renewable/energy-efficient technologies investments.
- Profit and non-profit entities can both lower tax liability and/or monetize tax credits.
Qualifying Clean Energy Technologies
Bio-gas, Combined Heat and Power (CHP), Systems Electrochromic Glass, Energy Storage/
Batteries, Fiber-Optic Solar Lighting, Geothermal Heat Pumps, Geothermal Systems, Qualified
Fuel Cells, Qualified Microturbine Systems, Small Wind Energy Systems, Solar Energy Systems,
and Waste Energy Recovery.
Important Factors to Consider
- No Tax Liability? A business with no income tax liability due to losses or incentives can convert the credit to cash by completing the registration process, finding an unrelated buyer, and reporting the transaction on its tax return.
- Tax-Exempt? Tax-exempt entities can receive direct cash payments by registering on the portal and filing a return to claim the payment, even without prior filings.
Base Credit Amount
Qualifying clean energy projects start with a base credit of 6%, increasing to 30% under certain conditions:
Prevailing Wage/Apprenticeship Requirements:
- Higher credits require adherence to specific wage and apprenticeship standards.
Exemptions for Smaller Projects:
- Projects under 1 megawatt (MWAC) are exempt from requirements in #1 and eligible for full credit.
Grandfathering for Earlier Projects:
- Projects beginning construction before Jan. 29, 2023, are eligible for higher credit w/o meeting #1 requirements.
Bonus Adders
- Domestic Materials/Energy Community: +10%
- Low-Income/Indigenous Communities: +10% - 20%
Depreciation Benefits
- Energy improvements qualify for 5-year MACRS accelerated depreciation, which reduces your taxable income in the initial years of a project, enabling faster investment recovery.
- If a business claims the Investment Tax Credit (ITC), the property's depreciable basis must be reduced by 50% of the credit amount claimed.