Tax Breaks: Not For You (Unless You're a Corporation)

Everyone understands that government policy can leave many wanting, but sometimes (a lot of times) policies totally exclude benefits for the majority of stakeholders. Take for example the tax credits and deductions given to energy efficient rental housing. Buried somewhere in the tens of thousands of pages of IRS tax code lies section 179D.

The Energy Policy Act of 2005 added tax code 179D as an energy efficient tax deduction for commercial buildings. Extended to 2013, this deduction allows commercial building owners to receive up to $1.80/square foot in deduction for energy efficient improvements. In order to qualify, the building must reduce annual energy and power costs by at least 50% compared to the minimum requirements of ASHRAE 90.1-2001. This can be achieved through improvements to interior lighting systems, heating and cooling, ventilation, hot water systems or building envelope. Sounds great if you qualify.
A qualified individual will have to conduct a Performance Rating Method to certify the property. Also, only commercial buildings and multifamily properties 4 stories or greater qualify.

Does congress not know that more than half of the all the US rentals are smaller structures with less than 4 units? I suspect they probably know that corporations own over 90% of multifamily properties with 50+ units. Still, if you do have (or plan to build) a multifamily property 4 stories or greater this is a big deal. For example, a 30,000 sq. ft. property could be eligible for $54,000 in tax deductions while improving your property and reducing your utility bills. 

Dig deeper and you’ll find more inequalities for the majority of rental property owners. The federal tax credit for energy efficient improvements of existing buildings specifically excludes rentals. Rental housing accounts for over 30% of the US housing stock of which more than half are owned by individuals with less than 4 units. Its laughable that federal energy policies are overlooking this gigantic group.

Clearly the lobbying efforts of national apartment and multifamily organizations are not fighting for the best interest of smaller owners. Incentives for smaller rental owners with tax deductions and credits is a win-win for all parties. National energy demand decreases, expenses for owners go down and tenants get a more comfortable and affordable dwelling.