The 179D Tax Deduction offers significant financial rewards for designers who reach specific energy-efficiency benchmarks defined by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) on their designs of government-owned or tax-exempt buildings.
ASHRAE 90.1 determines the energy-efficiency criteria that designers need to meet to reap the benefits of 179D. Currently, the required ASHRAE 90.1 2007 standard is in place, resulting in many designers meeting or exceeding these design qualifications. This means they could be missing out on huge financial savings for not only current projects, but past ones too.
The statute of limitations for 179D allows a designer to claim the tax benefits as far back as three years from when it was placed into service, so designers should capitalize on these deductions while the dated ASHRAE 90.1-2007 standard is still in place.
Understanding ASHRAE Standard 90.1
This comprehensive energy code establishes the minimum energy-efficiency requirements for commercial buildings. To qualify for 179D, the building’s architect or engineer needs to have designed either the HVAC, interior lighting, or building envelope system (or a combination of those systems) that meets or exceeds the energy efficiency requirements specified in ASHRAE 90.1 for the year in which construction or renovation is completed.
How 2007 Standards Help Qualifying for 179D
While ASHRAE standards have increased, the IRS uses ASHRAE standards from 2007 to substantiate 179D claims. By comparing to an older benchmark, architects and engineers can demonstrate how their modern designs are significantly more energy-efficient than the industry standards from 2007.
To determine a building’s energy consumption, software that models the energy performance of the building can also help designers showcase the additional energy savings achieved by incorporating more advanced features.
Path to Qualification
Properly claiming 179D requires those pursuing the deduction to go through a qualification process that entails more than just meeting ASHRAE Standards. Working with specialized tax consultants and engineers, such as KBKG, can not only streamline the whole claiming process, but maximize the claim as well.
By understanding the energy-efficiency requirements from ASHRAE and incorporating them into their designs, architects and other designers can help clients reduce costs on energy bills and be rewarded for it with valuable tax savings. For more information on how designing energy-efficient government and tax-exempt buildings leads to an increased bottom line, contact KBKG today.