Tax Incentives

Green Construction Tax Incentives

Numerous state government and power company programs, rebates and incentives make choosing sustainable products and practices fiscally rewarding for commercial property owners, helping them adopt green strategies for their facilities. Some of the most financially rewarding of the state and local power company programs can be found at the Database of State Incentives for Renewables & Efficiency.

IRS Green Construction Tax Incentives

In addition to programs that vary between states and power companies, there is also a federal tax deduction available through the Internal Revenue Service for commercial property owners who bring their property up to a minimum level of energy efficiency and was enacted in the 2005 Energy Policy Act. It applies to buildings that were retrofitted after December 31, 2005 and prior to January 1, 2009.

To qualify, the building must have 50% reduced energy costs resulting from improvements in the energy efficiency of the building's heating, cooling, ventilation, hot water and interior lighting compared to a reference building meeting the minimum requirements of ASHRAE 90.1-2001 Standard.

Deduction Amounts

The amount of the deduction is $1.80 per square foot of the property if the 50% improvement is documented. Lesser deductions are available up to $0.60 per square foot if the energy improvements reach a minimum level of 16 2/3% above the reference building mentioned above. The Department of energy also lists acceptable computer programs hat can be used to calculate and verify the energy improvement. It is unknown whether this tax deduction will be extended beyond January 1, 2009 at this time.