LED Lighting Upgrades:
Your Quickest Way to Recover Your Investment and Generate Cash Flow
LED Lighting Upgrades can trigger up to 4 tax deductions
1 – EPAct (Energy Policy Act of 2005)
Interior Lighting Only: All past qualified EPAct deductions can still be taken in the current year. EPAct is a qualified tax deduction when a capitalized investment in Lighting, HVAC and/or Building Envelope meet the ASHRAE (American Society of Heating, Refrigerating, and Air-Conditioning Engineers) for building energy efficiency.
EPAct deductions now include Indian Tribal Government and additional non-profit entities.
EPAct 179D can now be applied every three years for commercial properties, and every four years for government facilities. EPAct can qualify for a tax deduction ranging from $0.50 to $1.00 per square foot and must be calculated using the building method, which factors in the new lighting and the existing HVAC and building envelope. Interim or space-by-space method no longer applies.
When using prevailing wage, the deduction ranges from $2.50 to $5.00 per square foot.
2 – Abandonment (Disposition)
Interior Lighting: Write off the remaining depreciation of the obsolete lighting being removed. Most interior lighting is classified as a 39-year depreciation recovery asset and in most cases the lighting being removed is not fully depreciated. Therefore, the IRS allows the owner of the lighting (building owner or tenant) to write-off the remaining depreciation when they retire or abandon the lighting. This is called partial asset disposition.
Exterior Lighting: The same rules apply to exterior lighting, however, until a few years ago exterior lighting was classified as a 15-year asset and is now classified as a 5-year asset. We find that most exterior lighting is trapped in the 39-year recovery because when a building is acquired there usually is not enough detail to segregate the exact depreciable value of the exterior lighting.
3 – Bonus Depreciation and QIP (Qualified Improvement Property)
Bonus depreciation was set at 100% under the TCJA effective 2018 and applied to all building assets classified as a 20 year or less depreciable asset. Effective 2023, bonus depreciation is adjusted to 80%. LED Lighting can be reclassified from 39-year to 15-year assets, if it meets QIP requirements. In almost every case LED Lighting will qualify for 80% bonus.
TaxCentric Lighting offers custom QIP documentation to certify your upgrade as eligible for bonus.
4 – Accelerated Depreciation
The government allows real property building assets to be depreciated over 39, 15, 7 or 5 years. Most building owners have some level of cost segregation and are using all four depreciation schedules, however, in many cases the building owner has not identified all the short recovery assets and therefore many are trapped in 39 year. When an on-site engineered based study is conducted it is very common to find between 10% and 30% of the 39 year assets could be and should be moved to a shorter recovery depreciation and a one year catch-up deduction is allowed if there is enough detail to support a reclassification of assets.
Custom Financing Available
Our custom financing is designed to put the end user in an immediate positive cash flow. No up-front cash is required, and we offer first payment deferral options up to 6 months. This allows the end user to use the operating savings to meet or exceed the monthly finance payment.
Competitive interest rates.
Combine operating cost savings and tax deductions to realize positive cash flow as well as payback in about one year.
Contact us. Find out how TaxCentric Lighting can help you.