In late December, with a government shut-down looming on the horizon, Congress passed a massive government-wide spending package. Included in the plan were two major laws- The Consolidated Appropriations Act and the Further Consolidated Appropriations Act (“the Act”). The new legislation extended many popular tax breaks for businesses and individuals. Many of these incentives expired in 2017, but were retroactively extended for 2018 and 2019 through the end of 2020.
Some of the popular tax breaks for individuals include deductions for residential debt, mortgage insurance premiums, qualifying educational expenses, and unreimbursed medical expenses. For businesses, the Act included incentives for Empowerment Zones, the New Market Tax Credit, Work Opportunity Tax Credit, and a credit for employer paid family leave.
The package also included key energy-related tax provisions that directly affect construction and real estate industries. Two of these retroactively-reinstated incentives are found in section 179D and 45L. Section 179D was originally enacted in The Energy Policy Act of 2005 and encouraged green building projects for commercial and government buildings. Section 45L also provides incentives for energy efficient building.
What does the reinstatement of 179D mean for owners of commercial buildings?
Under Section 179D, qualifying commercial building owners or developers are allowed a federal deduction of up to $1.80 per square foot for installing energy-efficient property that reduces energy and power costs. Under Section 45L, home builders are eligible for a $2,000 tax credit for a new energy efficient home that achieves 50 percent energy savings for heating and cooling over the 2006 International Energy Conservation Code (IECC) and supplements. To qualify, at least one-fifth of the energy savings must come from home building envelope improvements. These credits also apply to contractors of manufactured homes conforming to Federal Manufactured Home Construction and Safety Standards and meeting the same energy efficiency requirements.
Because the incentives were thought to expire in 2017, eligible taxpayers who wish to take advantage of the reinstatement will need to complete amended 2018 tax returns.
If you have questions about whether you qualify for energy-related tax breaks or any of the other retroactive extensions, please contact the tax professionals at Rodefer Moss. We will answer your questions and help you maximize the tax benefits available under current law.