How Energy-Efficient Windows Help Commercial Buildings Qualify for Tax Credits and Incentives

September 24, 2024

Energy-saving windows play a significant role in helping commercial buildings qualify for various tax credits and deductions. Here’s how energy-efficient windows contribute to tax credits for commercial buildings:

1. Energy Efficient Commercial Buildings Deduction (Section 179D)

  • What it is: A tax deduction for owners or designers of energy-efficient commercial buildings that reduce energy use by a specified percentage through improvements in lighting, HVAC, or building envelope systems.
  • Role of Windows: Energy-saving windows, which reduce heat loss (U-factor) and solar heat gain (SHGC), can contribute to a building’s overall energy efficiency. This deduction applies to buildings that meet certain energy reduction thresholds for lighting, HVAC, and the building envelope, which includes windows.
  • How it works: If the installation of energy-efficient windows helps reduce the building’s energy consumption by at least 25%, they can qualify for a deduction. Depending on the level of energy savings achieved, the deduction can be up to $5.00 per square foot.
  • Window Specifications: To qualify, windows often need to meet or exceed energy efficiency standards set by organizations like ENERGY STAR® or ASHRAE.

2. LEED Certification and Green Building Incentives

  • What it is:  A globally recognized rating system that assesses the sustainability and environmental impact of buildings, while green building incentives offer financial or regulatory benefits to encourage the adoption of energy-efficient, eco-friendly construction practices.
  • Role of Windows: Energy-efficient windows can help buildings achieve LEED (Leadership in Energy and Environmental Design) certification, which is often linked to additional tax credits or incentives for green buildings.
  • How it works: Windows that improve the building’s energy performance contribute to the overall LEED score in categories like energy efficiency, indoor environmental quality, and daylighting. Many jurisdictions offer tax benefits for LEED-certified buildings, and energy-efficient windows can be crucial in achieving this certification.

3. Building Envelope Requirements

  • Role of Windows: Windows are a critical part of the building envelope, and improvements in their insulation, airtightness, and solar control properties directly reduce heating and cooling loads. By upgrading windows to meet or exceed energy code requirements, commercial builders can qualify for tax credits tied to overall building energy performance.
  • How it works: Windows that meet stringent energy codes (such as those outlined in the International Energy Conservation Code or ASHRAE 90.1) enhance the overall energy savings required to qualify for various federal, state, or local tax incentives.

4. Investment Tax Credit (ITC) for Solar and Other Renewable Energy

  • What it is:  An allowance for businesses and homeowners to deduct a percentage of the cost of installing solar and other renewable energy systems from their federal taxes, incentivizing clean energy adoption.
  • Role of Windows: While the ITC is primarily for renewable energy systems, it’s worth noting that building-integrated photovoltaics (BIPV), such as solar windows, can qualify for this credit. These advanced windows generate electricity from sunlight while still functioning as regular windows.
  • How it works: If energy-saving windows are equipped with solar technology (i.e., solar glass or facades), they can qualify for the 30% ITC, encouraging builders to adopt innovative window technologies that combine energy efficiency with renewable energy generation.

5. Energy Efficiency Rebates and Incentives

  • Role of Windows: Many state and local incentive programs that offer rebates for energy-efficient commercial buildings include windows as a key component of the building envelope.
  • How it works: Programs may offer cash rebates or additional tax incentives for upgrading to high-performance windows, particularly in retrofitting older buildings to meet current energy standards.

6. State-Specific Credits and Rebates

  • Role of Windows: Certain states offer additional tax credits or rebates for energy-saving windows as part of broader energy efficiency programs.
  • How it works: For example, California, New York, and other states with strong energy efficiency mandates may offer rebates for installing windows with high insulation (low U-factor) or solar control capabilities (low SHGC), which reduce energy costs for heating and cooling.

In summary, energy-efficient windows are an important component in qualifying for tax credits related to energy savings in commercial buildings. Whether through the 179D deduction, LEED certifications, or renewable energy incentives, windows can significantly enhance a building’s energy performance and contribute to tax benefits.