Business Tax Credits Available for Lighting Upgrades

Business Tax Credits for LED Lighting

Congress  has extended the Energy Efficient Commercial Buildings Deduction (Section 179D) tax credit originally included in the 2005 Energy Policy Act (EPACT) and the Emergency Economic Stabilization Act of 2008. If you manage, own or lease a commercial or industrial building, and you pay taxes, you may be entitled to receive a tax credit per square foot of building for installing or upgrading your lighting to an energy efficient LED system. You are eligible to claim the deduction for new construction and energy-renovation projects. The deduction is available for different types of building use, including warehouses, industrial enterprises, office buildings, retail stores, and four-story+ apartment buildings.

Carry-Back and Carry-Forward

If you previously installed LED lighting up to three years ago, you may be entitled to carry back accrued tax deductions for two years or carry those credits forward for up to 20 years. There are some exceptions to this, so please consult with your tax attorney or CPA.

How to Qualify

To qualify for available tax credits, the Act says the lighting system improvements must be made to interior systems. There are different ways to calculate the tax credit.

  • If the LED lighting system is installed as part of a major project which includes HVAC and/or building envelope work, the then energy saving resulting from the project must equal 16.67% of the total savings.
  • If the lighting system improvements come under the Interim Lighting Rule, then lighting power density should be reduced by between 25% and 40%, or 50% for a warehouse.

Cost Savings

179D enables savings of up to 60 cents per square foot. This site provides more detail. As we mentioned above, the energy savings must equal certain minimum levels, depending on which IRS notice applies, and the actual building use. The bottom line is that the tax savings – which can be carried back or forward – will have an impact on the cost of your renovation project.

Please click here to contact us to discuss how we may be able to assist with your energy savings plans to install or improve your LED lighting system. We are here to answer your questions. We are not tax experts, so please consult your tax attorney or CPA for specific tax advice.