The Energy Policy Act of 2005 created a tax deduction for energy efficient improvements to commercial buildings. A building may qualify for a Federal tax deduction as much as $0.60 per square foot for lighting upgrades to LED technology.
This is not some mysterious or “under the table” deduction. This is a veryspecific tax deduction written into the tax code that is available for small and large businesses to take advantage of.
This is a tax incentive created by the Government to encourage businesses to invest in themselves, save energy, and buy equipment.
LED lighting upgrades are one of the many investments you can make that will qualify for Section 179D deductions.
What is the difference between Section 179 D and 179 of the IRS tax code?
It should be noted that 179D and 179 deductions are similar, but both don’t apply to LED Lighting. Many large commercial vehicles and other items qualify for 179 deduction which allows for a full (accelerated) tax deduction all in one year.
LED Lighting qualifies for 179 D deduction which is up to $.60 per square foot IF you meet a minimum of 25% energy reduction (50% for warehouses).
Here’s how it works:
Let’s say you upgrade your manufacturing facility from the Metal Halide lights you have had for 40 years to a new, energy-efficient LED high bay. Sure, LEDs are you going to save over 60% in energy consumption, get increased light levels, reduce maintenance costs, lower overall heat in the facility, and offer you a utility rebate for upgrading. But, now you can also apply for additional savings on the Section 179 D Tax Code.
Here are types of buildings that can qualify:
- Retail buildings
- Office buildings
- Industrial buildings
- Warehouses
- Government-owned (city, state or federal) buildings including schools, airports, town halls, state colleges, etc.
- Apartment buildings (greater than 4 stories)
Typical Example of 95,000 sqft Warehouse Lighting upgrade:
- Cost of doing LED Upgrade – $63,000
- Utility Rebate – $24,000
- Total Cost (after Utility Rebate) – $38,000
- PLUS Up to a $.60 cents/sqft in Section 179D Deduction – $57,000
Hard for any business owner or manager to not be interested in numbers like that.
179 D is an IRS government program – as a result, it is not the easiest thing in the world to take advantage of. There are multiple hoops buyers/owners have to jump through and missteps in the process can result in delay or denial of the tax credit. Advising customers on the potential increased savings by utilizing the Section 179 D Tax deduction is one way LED Direct stands out and differentiates ourselves from our competitors.
We are experts in our field and knowledgeable about new industry trends and benefits. We are always looking for ways to help our customers understand the benefits of LED lighting and make sure they are aware of government programs that can help.
If you are working on a project that you think may qualify for 179D, contact us and we can help you work through the process. Talk to us today to see if your business qualifies.
(fine print: Only jobs from 2017 and prior are eligible at this time. We are LED lighting experts. We know about 179 D but we are not tax advisors. Please talk to your trusted tax advisor to confirm details.)