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Credits and Rebates

Credits and Rebates

LED Office

Federal Tax Deductions

According to the U.S. Department of Energy, lighting represents 40% of the average commercial building’s electric bill. The Energy Cost Savings Council has stated that energy-efficient lighting projects generate an average 45% return on investment, paying for themselves in just 2.2 years.

According to the Department of Energy, however, only 20% of existing commercial buildings feature some degree of upgraded lighting technology, while 80% continue to operate lighting systems installed before 1986. The reason typically given is initial cost of Retrofitting.

The Energy Efficient Commercial Buildings Tax Deduction was created to enhance the financial attractiveness of investment in the most energy-efficient lighting and other building technologies.

The Energy Efficient Commercial Buildings Tax Deduction (CBTD) is a special financial incentive created by the Energy Policy Act of 2005 and designed to reduce the initial cost of investing in energy-efficient lighting and other building systems via an accelerated tax deduction.

The tax deduction allows building owners (or tenants) to write off the complete cost of upgrading a building’s indoor lighting, HVAC/hot water and building envelope in the year the new equipment is placed in service, capped at $1.80/sq.ft. Alternately, the owner (or tenant) could upgrade one of these three systems to earn the CBTD capped at $0.60/sq.ft. In short, with the CBTD, the cost of new lighting or other building systems can be claimed in a single tax year instead of amortized over a period of years.

This deduction can be claimed for all qualifying projects completed before January 1, 2014.

Tax Deduction Versus Tax Credit

A tax deduction is a cost subtracted from adjusted gross income when calculating taxable income; tax liability is not reduced dollar for dollar, as is the case with a tax credit, but instead in proportion to the taxpayer’s tax bracket.