economicThe cost of LED lights becomes even lower
when you factor in applicable, tax deductions for
LED lighting upgrades.

1. 179(d) Deduction:

Section 179D allows up to $1.80 per square foot in deductions ($.60 per sq ft for lighting) to those who have upgraded their building’s lighting, HVAC, or building envelope. The 179D deduction provides a one time accelerated depreciation for commercial, multifamily, and public agency-owned facilities. This benefit, which is vastly misunderstood and under used
by most building owners, provides a significant reduction in taxes for those who have retrofitted their buildings with energy efficiency upgrades. To learn more, please contact us.

2. Abandonment Deduction:

When Obama Energy approved installation partners install new LED lighting, we often remove the ballast and fixtures. These “old assets” have a 39 year tax life and this means they also have a substantial book value. That residual value (the difference between the 39 year tax life and actual age of the ballasts) is a major business expense. So just like any expenses they result in a tax deduction. These are a great way to recoup.

3. Cost Segregation–Accelerated Depreciation Deduction:

An IRS approved strategy of asset reclassification from “Real Property” into “Tangible Personal Property” is another significant deduction. The result of moving appreciable assets from 39 year (commercial property) or 27.5 (commercial residential) years into assets that
qualify for 5, 7, 10 or 15 year tax lives is much more rapid depreciation. And the bottom line is huge tax savings. Asset reclassification is not a new strategy, however it is not widely understood and rarely utilized.

EXAMPLE

500,000 sq ft
distribution center

COST / DEDUCTION

$350,000 in capital costs
$300,000 in EPAct deduction
$120,000 in Abandonment

BENEFIT

$420,000 in tax deductions,
at a 35% tax bracket this client
saved $147,000

Ask your accountant about contacting us regarding these money savings tax deductions.