If you’re considering a switch to LED lighting in your commercial building, but you’re still on the fence, you shouldn’t hesitate for too long. After December 31, 2013, two primary tax incentives for upgrading your lights are set to expire – the Section 179d EPACT Incentive and the Bonus Depreciation Incentive.
If you’ve never heard of these opportunities to help make up for the initial cost of new LEDs, allow me to explain…
The Section 179d EPACT Incentive allows you to deduct 60 cents per square foot on lighting upgrades. This incentive is part of The Energy Policy Act of 2005 to encourage the construction of energy efficient buildings. It also includes deductions for HVAC systems, building envelopes, and service hot water systems that reduce the total annual building energy costs by 50% or more compared to ASHRAE 90.1-2001 minimum requirements. It’s available to owners of both new and existing commercial buildings.
The Bonus Depreciation Incentive allows building owners to deduct 50% of the purchase price of energy efficient materials in the first year of use. Typically improvements must be depreciated over 5 years.
Options are also available for partially qualifying properties – you could qualify for a portion of the deduction, depending on how much energy your upgrades save.
To actually get these deductions, you’ll need to go through a short process of gathering information about your upgrades, analyzing your energy savings, and reporting this information to your accountant.
For more information, read this notice from the IRS.