2016 Tax Credits You Should Know About
Single-Family, Multi-Family, Commercial, and Affordable “Builders, Developers, and Homeowners”: Below is a brief overview of some important tax credits/deductions you should know about for 2016. They are Section 45L: Builder Energy Efficient Home Federal Tax Credit, 25C: Nonbusiness Energy Property Credit, 25D: Residential Energy Efficient Property Credit, 179D: Commercial (and Multi-Family built under Commercial Code) Energy Efficient Deduction, 179 Equipment and/or Software Full Deductions, and LIHTC: Low Income Housing Tax Credit Minimum.
45L: Builder Energy Efficient Home Federal Tax Credit. Builders and Developers, Single Family and Multi-Family (up to three stories), can collect $2,000 of tax credit for each new dwelling unit. Builders and Developers that exceed the heating and cooling 2006 IECC energy standards by 50% are eligible. Most California builders and developers already qualify due to the CA Energy Efficient Standards already in place. Find out more here: http://ducttesters.com/2015/12/collecttaxcredit/
25C: The Non-business Energy Property Credit. This is ideal for remodelers. Make home improvements using qualified energy efficient products and collect a 10% tax credit subject to a $500 lifetime cap. Upgraded products include: exterior windows, exterior doors, adding insulation, and certain roofs (installation not included). There is also a credit (including installation) for select heating and air-conditioning systems, hot water heaters, biomass fuel stoves, and oil hot water heaters. A stipulation to the $500 credit limitation is that only $200 may be used for windows, and all improvements must be made to the taxpayer’s primary residence. https://www.irs.gov/Credits-&-Deductions/Individuals/Nonbusiness-Energy-Property-Credit
25D: Residential Energy Efficient Property Credit. Install qualified energy efficient property of: solar panels, wind turbines, geothermal heat pumps and fuel cells…in new or existing homes, get 30% of the expenditures back in tax credit. All must be placed in service on or before December 31, 2016. The credit for fuel cell expenditures made is limited to $500 for each one-half kilowatt of capacity of the property; the amounts of the other qualified expenditures eligible for the credit are not limited. https://www.irs.gov/Credits-&-Deductions/Individuals/Residential-Energy-Efficient-Property-Credit
179D: Commercial Buildings (and Multifamily built under Commercial Code) Energy Efficient Deduction. Builders that surpass the minimum energy efficient standards in new construction and renovation receive a deduction. The more energy efficient the building is, the larger the deduction the builder receives (up to $1.80 per square foot). The energy efficiency elements evaluated in order to obtain this deduction are: the building envelope, the HVAC system, and the lighting. The taxpayer must obtain a third party certification to verify the energy savings are legitimate. This tax incentive, supports and rewards building owners who want to lower operating costs and increase operating profits. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Commercial-Property-Owners-and-Leaseholders-Qualify-for-Energy-Efficiency-Tax-Deduction
179: Equipment and/or Software Full Deductions instead of taking depreciation deductions. This renewed section of the tax code allows businesses to deduct the FULL purchase price of qualifying equipment and/or software “new or used but new to the business” purchased or leased during the year – now up to $500,000 but capping out over time when the deductions reach $2,000,000. A business can write off equipment through depreciation over a few years, Section 179 of the tax code allows businesses to deduct the full amount. This tax incentive was created to encourage businesses to buy equipment/software and invest in themselves. Under this section, there is also a renewed 50% bonus depreciation “for new equipment only” but the percentage will phase down to 40% in 2018 and to 30% in 2019. The bonus depreciation is useful to businesses that spend more than $2,000,000 and businesses with a net loss who can also qualify and carry forward the loss. https://www.irs.gov/publications/p946/ch02.html
LIHTC: Extension of Low Income Housing Tax Credit Minimum Set at 9%. This renewed bill extends the minimum 9% low-income housing tax credit (for non-federally subsidized buildings) which is used for financing new construction and substantial rehabilitation. Keeping the 9% minimum permanent for federal housing credit, it helps provide affordable housing developers more certainty for future project planning. When the credit rates decline there is less equity available for the affordable developments. http://nahbnow.com/2015/12/omnibus-bill-huge-wins-for-affordable-housing/