Real Estate Right Now is a video series covering the latest real estate trends and opportunities and how you can make the most of them. In the episode below, we discuss two major tax benefits of adopting energy-efficient practices. Click below to watch.
As a real estate investor, you can take advantage of government rewards by adopting energy-efficient technologies and practices. Two incentives investors should know about are the Section 179D deduction and the 45L Tax Credit. Here’s what you need to know:
Section 179D: The Energy-Efficient Building Deduction
This deduction is for building owners who install energy-efficient systems in their commercial properties. This includes interior lighting, mechanical systems and the building envelope. For government and nonprofit buildings, this deduction extends to designers, architects, and contractors.
- For properties placed in service before January 2023: The deduction is up to $1.80 per square foot, indexed for inflation.
- For Properties Placed in Service Between January 2023 and December 2032: The deduction is up to $5.00 per square foot -indexed for inflation.
However, projects initiated after January 2023 may require adherence to prevailing wage standards to qualify for the higher deduction amount.
45L Tax Credit
This credit is designed for multifamily developers and homebuilders who construct or reconstruct qualified energy-efficient homes, and then sell or lease them.
To qualify, developers must undergo a pre-certification process and regular building inspections, as well as pay prevailing wages.
This credit can be worth up to $5,000 per dwelling unit, depending on the type of home and energy-efficient measures implemented. For example, a developer with a one-hundred-unit development could receive a credit of 500,000!
If you believe your projects might qualify for these credits and deductions, consult with your financial advisor or tax professional to explore your eligibility and maximize your tax benefits.
This material has been prepared for informational purposes only and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
