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The Energy Efficient Commercial Buildings Tax Deduction

The Energy Efficient Commercial Buildings Tax Deduction (CBTD) is a special financial incentive created by the Energy Policy Act of 2005 and designed to reduce the initial cost of investing in energy-efficient lighting and other building systems via an accelerated tax deduction.

This special tax deduction allows building owners (or tenants) to write off the complete cost of upgrading a building’s indoor lighting, HVAC/hot water and building envelope in the year the new equipment is placed in service, capped at $1.80/sq.ft. Alternately, the owner (or tenant) could upgrade one of these three systems to earn the CBTD capped at $0.60/sq.ft. In short, with the CBTD, the cost of new lighting or other building systems can be claimed in a single tax year instead of amortized over a period of years.

The CBTD expiration date has been extended twice, most recently by the Energy Independence Act of 2007 (EISA). With this extension, the CBTD can be claimed for qualifying projects completed before January 1, 2014.

Tax Deduction Versus Tax Credit

A tax deduction is a cost subtracted from adjusted gross income when calculating taxable income; tax liability is not reduced dollar for dollar, as is the case with a tax credit, but instead in proportion to the taxpayer’s tax bracket.

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COMMERCIAL BUILDINGS TAX DEDUCTION (ALL SYSTEMS)

For projects completed before January 1, 2014, a CBTD can be claimed that covers up to the entire deductible cost of investing in the installation of energy-efficient commercial building property, capped at $1.80/sq.ft.:

Indoor lighting systems AND HVAC/hot water systems AND Building envelope features

To qualify, EPAct 2005 and IRS Notice 2006-52 state: 

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Act Now! Replace your dull and inefficient metal halide, high pressure sodium and mercury vapor  lamps with long-life Induction Lighting as area lighting in manufacturing plants, industrial factories and warehouses. Call Steve at 844.533.7767.

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