Cost Segregation Case Study
|Evaluation of $3M Office Building Renovation||Deduction|
|5-Year Recovery Period||$300,000|
|7-Year Recovery Period||$100,000|
|15-Year Recovery Period||$300,000|
|Add. Deductions Year 1||$500,000|
|Increased Cash Year 1||$205,000|
|Net Present Value (NPV)||$265,000|
The 179D Energy Efficient Commercial Building Deduction provides a tax incentive of up to $1.80 per square foot of commercial buildings. The deduction applies to the design and installation of energy efficient systems, such as HVAC, Lighting, and Envelope systems. The 179D is available to building owners as well as the designers and builders of government owned buildings.
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Eligible for Cost Segregation
Many components of buildings can be reclassified as 5, 7, or 15 year assets from their original 27.5 or 39 year lives. This provides the benefit of accelerated depreciation, which reduces taxes and increases cash flow. Building owners can take advantage of the ability to look back and “catch-up” lost depreciation deductions.
An eligible contractor who constructs a dwelling unit can obtain a certification that the dwelling unit is an energy efficient home that satisfies the requirements of § 45L and receive a $2,000 tax credit per dwelling unit. To qualify, a contractor must own an have a basis in the qualified home during its construction.