45L Federal Tax Credit – Developers can take immediate advantage from their new and past energy efficient building projects via this relatively new government policy. Qualified projects include condominium buildings, apartment buildings, single family home and manufactured housing developments that were constructed or renovated within the last 6 years. Deduction claims for eligible improvements must be certified by a qualified third party to consume reduced energy via their heating/ cooling systems and general envelope as shown by computer simulated dwelling performance. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the Energy Efficient Home Credit which allows developers of energy efficient residential buildings a significant federal tax deduction for the costs of installing certain energy efficient systems. The tax deduction offers up to $2000 per dwelling unit for energy efficient projects completed after August 8, 2005. This specifically applies to residential properties designed to consume less heating and cooling energy costs in comparison to ASHRAE 2004 standards.
179D Energy Tax Deductions – IRS Code Sec. 179D allows a tax deduction for energy efficient property placed in service in commercial building property from January 1, 2006, through December 31, 2013. The deduction total is limited by the overall square footage of a qualifying building. The maximum deduction is $1.80 per square foot. However if the building’s energy-reducing investments do not qualify for the full $1.80 per square foot, the investments may still qualify for some deduction for investment in any of the following three major sub-systems:
- Lighting
- Heating, ventilation and air conditioning (HVAC)
- Building envelope.
Each component system can qualify for up to 60 cents per square foot. Partially qualifying lighting, HVAC and building envelope property is defined in IRS Notice 2006-52, which states that a qualifying system must reduce the total energy usage costs by at least 16 2/3-percent as compared to a reference building that meets the minimum requirements of Standard 90.1-2001. Notice 2006-52 also states that certification the qualified systems meet 179D requirements must be supplied by an engineer or contractor that is properly licensed as a professional engineer or contractor in the building’s location jurisdiction and that only qualified computer software is permissible to calculate and document the improved energy performance.
Repair & Maintenance Studies – Through a thorough analysis of your expenses for repairs and maintenance, Blue Ray Engineering can help you reduce your tax liability and improve cash flow by properly reclassifying these expenditures. First, we will identify which asset costs are not properly classified, then reclassify them as deductible repairs as defined by IRS Code Sections 162 and 263. Deductible repairs may include “incidental repairs” that help to maintain efficient operating condition but do not necessarily prolong its life, add material value or adapt the property for new or different use. Expenses incurred or paid for incidental repairs and maintenance are not considered as capital expenditures and may be reclassified to accelerate deductions in the current year.
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