J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Energy Improvements

Usually, capital improvements to a building must be recovered through depreciation, as explained earlier in this chapter. However, certain energy improvements to commercial realty made through 2013 can be immediately deducted. For example, some of the cost of adding insulation to the walls and attic of a commercial building may be deductible.

The deduction applies to property installed in a building as part of the interior lighting system; heating, cooling, ventilation, and hot water systems; or the building envelope as part of a plan to reduce annual energy and power costs by 50% or more in comparison with a reference building meeting Standard 90.1-2001. Standard 90.1-2001 refers to standards of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (in effect on April 2, 2003).

The deduction is $1.80 per square foot for a 50% energy savings target or 60 ¢ per square foot for a 16⅔% energy savings target. A reduced deduction can be claimed in certain situations. The basis of the building must be reduced by the amount of any such deduction.

To claim the deduction, you must obtain certification for your improvements from a field inspection conducted by a licensed engineer or contractor.

Other Business Energy Improvements

There is an energy tax credit for a specified percentage of the basis of each qualified energy property placed in service. Qualified energy property includes solar ...