Notable Deductions
You may have heard the expressions “make hay while the sun shines” or “strike while the iron is hot.” These old proverbs are particularly relevant to current tax laws. More and more often, Congress is enacting tax breaks on a temporary basis—creating “limited time only” offers.
Some of these temporary breaks may eventually be extended by Congress, but others may not be. So, where practical, you may want to take advantage of the breaks while they are available.
To help get you started, here are a few breaks that are currently set to expire in 2009.
- If you claim the standard deduction for 2009, you may also claim an additional deduction for real estate property taxes.
- Whether you claim the standard deduction or itemize your deductions for 2009, you can deduct the sales tax you pay on a car or truck purchased by December 31, 2009 (but the deduction is phased out if your income is too high).
- If you itemize your deductions for 2009, you can choose to deduct state and local sales taxes instead of claiming a deduction for state income taxes.
- If you buy a principal residence by December 1, 2009 and haven’t owned a home during the prior three years, you are entitled to a tax credit of up to $8,000 (but again, there is a phase-out if your income is too high).
- If you are age 70 ½ or over and own an IRA, you don’t have to withdraw any funds from your IRA in 2009 unless you wish to.
There are other breaks scheduled to expire in 2009 and still others will expire in 2010. If you would like more information, please contact us.
Energy Efficient Building Deduction
Energy Policy Act: The Energy Policy Act of 2005 (EPAct) added Code §179D, which provides up to a $1.80 per square foot as an immediate tax deduction. Building investments that achieve specified energy cost reductions beyond ASHRAE 2001 building energy code standards are eligible. Within the $1.80 maximum incentive are three potential subsystem tax deductions, allowing for a maximum of $.60 per square foot for lighting and lighting controls; HVAC (heating ventilation and air conditioning); and the building envelope. The building envelope is defined as the perimeter of the building including roof, walls, windows, doors and floor/foundation. The incentives apply to buildings or systems placed in service or remodeled during calendar years 2006–2013. In the case of a non-taxpaying entity (municipalities, schools and government buildings) EPAct provides for the primary designer, typically architects and engineers, to obtain the incentive benefits.
Bright Benefits: The process of qualifying for lighting deductions is easier than for HVAC or the building envelope. For those two areas, energy modeling is required. The lighting market is enjoying sustained strength. Rising electricity costs, more rigorous state and local building energy codes, and improved lighting products are resulting in compelling economic paybacks, many times less than two years. As a result, it is easier for facility executives to win funding for energy-efficient lighting investments before HVAC or building envelope. Lighting specifiers are increasingly comfortable with the EPAct lighting requirements and know they can meet them for the most property categories. This confidence enables them to include EPAct tax benefits right in the initial lighting proposal.
