Tax Time Savings: How Commercial Building Costs Can be Reduced

Tax Documents

When you have a commercial building, it can seem as though every little change can impact your overhead costs. As the Department of Energy has realized this, it has made available a wide range of rebate and tax credit initiatives to help reduce the amount of energy used by businesses in their daily operations. The federal Energy Policy Act of 2005 is just such an opportunity, with savings for lower energy lighting, more efficient HVAC and hot water systems and better building envelope systems. Here's more on this initiative and how to take advantage of potential savings in building envelope innovations.

Energy Policy Act of 2005

This federal initiative was originally focused on creating a tax deduction for energy efficient commercial buildings and building systems that were put in place in 2006 to 2007, but it's been extended a number of times in the past decade. But the initiative is now planned to expire on December 31, 2016. This means if you want to take advantage of the potential tax savings, you'll need to act quickly.

Piggy Bank

The Act was originally developed to provide a $0.60 per square foot savings in three different areas, up to a total tax deduction of $1.80 per square foot available. These energy efficient options include interior lighting options, a more efficient building envelope and HVAC and water heating systems. These upgrades must reduce the energy consumption of the building by at least 50% when it's compared to a similar structure that only meets the minimums as laid out in the ASHRAE standard 90.1-2007.

Individual deductions for each area of $0.60 per square foot can be used if they would provide a reasonable contribution towards building energy savings of 50% or better if the additional systems were also installed. That means that if building envelope upgrades or improvements would significantly decrease the building energy use, it would qualify for the lower deduction without having to install the HVAC, hot water heating and lighting upgrades at the same time, making it a better option for many business owners and contractors. Though these deductions are typically provided to building owners and tenants who make their own construction upgrades, it's also available to those responsible for the system design when the upgrades are made on government properties.

Money and Buildings

As with many tax deductions, the deduction is claimed the year the construction is completed. The IRS has a number of documents available for the certification process, further rules classifications and guidelines on how to model and inspect the required energy savings. Because this program offers immediate benefits on tax returns, it's a great way to approach business owners who may otherwise be wavering over the cost of building envelope upgrades due to the cost of construction, even if they already appreciate the cost savings they'll see down the road. The limited time frame also provides some amount of leverage to get the job initiated more quickly, as the benefit ends at the end of this year, helping get reluctant business owners and managers into gear to get the job done now instead of continuing to wait for a better option.

Beyond the basic certification processes, the deduction can also be calculated by adding natural ventilation features to reduce heating and cooling costs and envelope improvements to semi conditioned spaces to improve energy efficiency. Inspections are undertaken by engineers and contractors who are able to meet the National Renewable Energy Laboratory guidelines.

Whether your building is new or has been in use for a number of years, taking advantage of the tax benefits of an energy efficient building envelope upgrade provides both immediate benefits from a tax deduction as well as long term benefits from reduced energy costs and overhead. But what approach will work best for your situation? Because Wallboard Supply Company hires associates with experience in the industry, we have the resources available to help you decide which approach to take. Please feel free to contact us today for more details, with any questions or to schedule a delivery to your worksite.

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Wallboard Supply Company is a third generation, family run business that has been serving New England's building needs since 1970. Bob Filion started the company with a commitment to provide quality drywall and finishing products with unmatched customer service. The company has grown over the years, expanding its' product range, but never wavering from its' core values.