179D and 45L Tax Incentives: Qualifications, Impact of Inflation Reduction Act, Caveats, Practical Examples

Energy efficient properties not only help sustain the environment, but they can also qualify for generous tax credits and deductions. The Section 179D deduction allows for an up to $5.00 per square foot tax deduction for qualified, commercial, and residential buildings and improvements. Building envelope, HVAC and hot water systems, and interior lighting can all qualify. Among the businesses that can benefit the most are owners of buildings for real estate, manufacturing, and healthcare organizations as well as designers (architects, engineers, contractors) of buildings for government and tax-exempt entities.

Also available are Section 45L tax credits. This credit has been around since 2005. Offering a $2,000 credit per dwelling unit available, prior-year tax returns can be amended to provide cash for qualified improvements made in open years. Multifamily developments, residences, and condominiums could all qualify for this credit of $2,000 a unit. For large complexes with multiple units, the savings can be remarkable. The Inflation Reduction Act significantly increased the credit to $2,500 per residential unit and to $5,000 for these same homes that meet DOE Zero Energy Ready Home standards.

In addition to meeting qualifying guidelines, both incentives require certification from an eligible professional. Tax practitioners working with businesses need to understand the benefits and caveats of these tax incentives.

Listen as our panel of tax incentive professionals discuss the 45L credit and 179D deduction for advisers working with clients constructing and improving buildings.

1. 179D and 45L tax incentives: introduction
2. History of 179D and 45L including relative case law
3. 179D and 45L and the Inflation Reduction Act
4. Qualifying for 179D and 45L tax incentives
5. Caveats of 179D and 45L
6. 179D and 45L examples

The panel will cover these and other key issues:

• Qualifying requirements for 179D deductions
• Buildings eligible for the 45L credit
• Examples of specific energy-efficient property and relative 179D deductions
• Caveats to consider relative to these tax incentives
• The impact of the Inflation Reduction Act on 179D deductions and 45L credits

Learning Objectives

After completing this course, you will be able to:

• Identify property qualifying for 179D deductions
• Determine which clients could benefit from 179D deductions
• Decide which industries benefit most from 179D and 45L tax incentives
• Recognize buildings eligible for 45L credits
• Ascertain which returns can be amended to take advantage of the incentives

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).