There is always a bit of confusion between a Section 179 tax credit and a Section 179D tax deduction. The first is a deduction for office equipment purchases and depreciation while a Section 179D tax deduction is a deduction provided for energy efficiency in commercial buildings.
Even though some people use the term “credit” with both the Section 179 tax credit and the 179D, they are actually deductions. This means that they can be used to offset taxable income, which can have a very large impact on the amount of taxable income that a business pays on per year.
The Process for Energy Efficiency Deduction
The 179D deduction is actually a very simple process for the leaseholder or the property owner. All documentation, models and data will be collected by a professional, accredited engineering company that will come in and certify that the building has achieved specific energy reduction in three different areas of focus.
This starts with an initial interview with the company and the opportunity to quickly screen your building, often over the phone, to determine if it may be a candidate for the deduction. The company will then complete a more detailed study to determine if your building will qualify which will then allow you to determine if it is in your best interest to move forward.
The Actual Inspection
The IRS accredited group or firm, typically made up of engineering, accounting and LEED certified staff will then complete the IRS required inspection and analysis. This is done using software models and documentation set forth by the IRS.
This is a very detailed and complex analysis and inspection and the property owner can be involved or can simply be provided with a final copy at the end of the process. Once the on-site work is completed and the required data collected the models are fully developed and the documentation is completed for your final review.
Since this is very different than the Section 179 tax credit for business equipment, it is critical to make sure that you are talking to your accountant and business consultant about a Section 179D tax deduction for energy efficiency when you are making the decision to move forward with the application. For more information click here.
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