In today's world, building green is more than a responsible choice—it's a financially savvy one. With a global push towards sustainability, energy-efficient construction has emerged as an unexpected pathway to significant tax savings.
This guide will explore the hidden financial rewards of sustainable construction, making a compelling case for considering eco-friendly alternatives in your next project. Whether you're a builder, investor or homeowner, we'll shed light on how going green is a strategic move that can boost your bottom line.
The Monetary Advantages of Building Sustainably
Energy-efficient construction is often associated with higher upfront costs. However, the benefits of energy-efficient construction can often well outweigh the costs in regards to:
- Long-term savings: Green upgrades like solar panels, ENERGY STAR appliances and low-flow plumbing can significantly cut energy bills.
- Tax incentives: Many improvements qualify for federal tax credits and deductions, sometimes offsetting 30% or more of project costs.
- Increased property values: Efficient buildings usually have higher property values and rental incomes.
Digging Into the Details of Green Tax Breaks
A variety of specialized tax breaks exist for green building projects. Two major examples are the Section 179D deduction and the Section 45L tax credit:
- The 179D deduction allows you to deduct up to $5.00 per square foot for installing qualifying energy-efficient systems in new or existing commercial buildings and residential buildings over 3-stories.
- The 45L credit offers as much as $5,000 in dollar-for-dollar tax credits for energy-efficient residential dwelling units.
Making the Most of Green Building Tax Perks
If you want to fully capitalize on the benefits of energy-efficient construction for tax savings, it’s a good idea to collaborate with contractors, architects and designers who specialize in green building. They will ensure your project meets the technical requirements and efficiency standards needed to qualify for tax breaks. Having proper LEED or Energy Star certification is a great indicator toward the energy savings needed for these tax programs.
Most importantly, you should consult early on with accounting and tax professionals familiar with green building incentives. Specialists like those here at Engineered Tax Services can map out a customized tax savings strategy around your specific project. They can pinpoint every deduction and credit you qualify for and help ensure proper documentation.
Discover how 179D energy-efficient construction isn't just good for the planet—it can be great for your bottom line!
Explore our blog post on the benefits of energy-efficient construction for tax savings to understand how this trend is shaping the future of construction and taxation.
Seeing Green Savings in Action
The benefits of energy-efficient construction for tax savings may seem abstract, but real-world examples demonstrate how these incentives can lead to major savings:
Reserve Center Building in Baton Rouge, LA
For this 132,772 square foot military facility, Engineered Tax Services conducted a comprehensive 179D evaluation. We certified the building as achieving major energy efficiency improvements through upgraded HVAC, lighting and other systems. Based on the building's total area, these green features made the investor eligible for $154,015 in federal tax deductions.
Assisted Living Facility in Negaunee, MI
For this 32,000 square foot mixed-use building, our team identified $76,000 in 45L tax credits for energy-efficient construction. In combination with a cost segregation study, we were able to put over $4.5 million in tax benefits back in investors' pockets.
Start Building Green and Reap the Tax Rewards
As we've seen, energy-efficient construction offers much more than just environmental benefits—it opens the door to significant tax incentives that boost your bottom line. Beyond the financial incentives, sustainable building elevates your reputation, attracts eco-minded tenants and shows you care about the planet's future. It's a winning proposition from every angle.
Interested in exploring how energy efficiency can maximize returns for your next development or renovation project? The tax specialists at Engineered Tax Services are ready to help. Contact us today to learn more about the many benefits of energy-efficient construction for tax savings.
