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Tax Deduction Program

Tax Deduction Program for Building Owners


Tax Deduction

Photovoltaics clays and roofing systems

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Tax Deduction Program

The Tax deduction programs are available primarily to building owners, but tenants might be eligible for the tax program, only if they are paying for the necessary upgrades. If the efficient systems are being installed in government property, the benefits of the tax deduction program will be directed to the professional who is responsible for the design. Tax deductions are credited in the year when the project is completed.

Tax Deduction: Origin of the Program

The tax deduction for energy-efficient commercial buildings was first enacted with the approval of the federal Energy Policy Act of 2005. This act was established for buildings placed in service from January 2006 through December 2007. Subsequently, and due to the great success received with the program, it was extended through 2008. Finally, section 303 of the federal Energy Improvement and Extension Act of 2008, enacted in October 2008, established a new end date for the tax deduction program, December 2013.

Tax Deduction: Benefits of the Program

Owners of new and existing building might get a tax deduction of $1.80 per square foot. This credit or deduction is available to owners who install:

1. Interior lighting,

2. Building envelope,

3. Heating, cooling, ventilation, or hot water systems,

that successfully can reduce building’s total energy and power consumption by 50% or more when compared to a building meeting minimum requirement set by ASHRAE Standard 90.1-2001.

The total energy saving's calculation must be made using qualified computer software approved by the IRS. Click here for the list of approved software.

Tax deductions of $0.60 per square foot are available to owners of buildings in which individual lighting, building envelope, or heating and cooling systems meet target levels that would reasonably contribute to an overall building saving of 50% if additional systems were installed.

The guide IRS Notice 2006-52, published by I.R.S. in June 2006, established a process to allow taxpayers to obtain a certification that the property satisfies the energy efficiency requirements contained in the statute. However, the IRS Notice 2008-40 was issued on March of 2008 to further clarify the rules. NREL published a report (NREL/TP-550-40228) in February 2007, which provides guidelines for the modeling and inspection of energy savings required by the tax deduction program, and the US Department of Energy has compiled a list of qualified computer software for calculating commercial building energy and power cost savings.

For additional information regarding this tax deduction program you should visit the Energy Star website.

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