EPAct 2005 and the Commercial Building Tax Deduction

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The Energy Policy Act of 2005 included a new tax incentive, backed and advocated by the National Electrical Manufacturers Association (NEMA) and the Natural Resources Defense Council (NRDC), to improve the energy efficiency of commercial buildings. The "Commercial Building Tax Deduction" establishes a tax deduction for expenses incurred for energy efficient building expenditures made by a building owner. The deduction is limited to $1.80 per square foot of the property, with allowances for partial deductions for improvements in interior lighting, HVAC and hot water systems, and building envelope systems. 

The Emergency Economic Stabilization Act of 2008 (HR-1424), approved and signed on October 3, 2008, extends the benefits of the Energy Policy Act of 2005 through December 31, 2013.

According to the U.S. Department of Energy, lighting represents 40% of the average commercial building’s electric bill, followed by motors/HVAC (40%) and other equipment (20%).

For years, energy-saving lighting solutions have been available that can reduce lighting energy costs while maintaining or potentially improving lighting quality. According to the Energy Cost Savings Council, energy-efficient lighting generates an average project payback period of 2.2 years and a 45% return on investment. Due to energy codes and common sense economics, energy-efficient lighting is becoming a common feature in new construction. Lighting is generally considered the easiest, most profitable investment in energy-saving building systems.

Lighting provides the highest return on investment, resulting in the fastest payback.


These resources provide information on what is currently known about the new tax incentives:

NEMA Assessment of the energy Policy Act of 2005 (PDF 672 KB)

http://www.irs.gov/pub/irs-drop/n-06-52.pdf and http://www.irs.gov/pub/irs-drop/n-08-40.pdf




Tax Incentives Assistance Project (TIAP)

Energy Policy Act of 2005 Consumer Energy Tax Incentives


Alliance to Save Energy - New Energy Efficiency Home and Vehicle Tax Credits

The Interstate Renewable Energy Council Database of State Incentives for Renewable Energy


1. http://www.efficientbuildings.org
2. http://www.lightingtaxdeduction.org
3. http://www.nemasavesenergy.org