There’s no refuting it: Green building incentives are on the rise. As more programs are offered to incentivize businesses to become more energy efficient, the time is ripe for taking advantage of these tax benefit programs.
To truly maximize your green building tax benefit with minimal obstacles along the way, you definitely do not want to launch into claiming these benefits without establishing a proper process. Too often business either don’t capture as many benefits as they could, or worse, are audited due to unsubstantiated claims.
The following are common yet detrimental mistakes business owners make when pursuing green building incentives (and ways to avoid them altogether):Mistake #1: Not considering green building incentives during the design phase of the project.
It’s certainly worthwhile to pursue green building incentives if you’ve done energy-efficiency projects that qualify for certain tax credits or deductions. However, to truly get the most tax benefit from green building incentives, you need to strategize during the design phase of the construction process.
In the design phase, you want to consider a variety of green building options, and work with your team to weigh the benefits. Many acceptable changes can be made to enhance your tax savings, so it’s important to consider such performance targets as energy use, water use, landscape, construction materials, recycling and composting facilities, construction practices and indoor environmental quality.
Mistake #2: Not working proactively with your contractor to capture the information necessary to claim these tax incentives.
The earlier you start devising a tax savings strategy around green building incentives, the more cooperation you need from your contractor. If you’re not documenting everything during design and construction, you won’t have the information needed to claim green building credits and deductions with accuracy.
To avoid this mistake, incorporate your general contractor’s cooperation in providing all necessary information as part of the fee agreement.
Mistake #3: Not preparing the documentation as if it was being audited.
A common mistake many building owners make when claiming green building incentives is taking shortcuts on forms and documentation. A lack of appropriate documentation, as outlined by the IRS, could be a red flag for an audit. When that happens, will you have the right documentation the IRS is asking for to substantiate your claims?
As part of capturing green building incentives, it’s a recommended best practice to assemble an audit package that can be provided to a tax jurisdiction if the benefits come up in an audit.
Mistake #4: Not working with an experienced service provider to capture all available tax benefits.
It is advisable to partner with an outsourced tax consultant that’s backed by a team of professionals with construction, engineering and tax experience.
This team is able to not only conduct a proper analysis of your property’s components, but also interpret complicated tax law to determine all tax incentives you qualify for. Along with green building programs, your tax consultant’s analysis lends itself naturally to accelerated depreciation for valuable tax deductions of your fixed assets.
Ready to jumpstart your initiatives to capture green building incentives? See what programs you qualify for, based off of your state.
