Lighting, by IRS definition, is a 1250 category asset and has an accounting life of 39 years. The IRS splits assets into two categories - 12 - in essence, separating assets into buckets based on their lives. In other words, the ROI was under one year! The net after-tax benefit of the tax deductions and the first year energy savings exceeded the cost of the retrofit. The cost of the relighting was $140,000, and the benefits were as follows: Let's look at an example of a 250,000-square-foot warehouse. This deduction can provide significant economic benefit to the property owner. This means that the net book value of the asset is written off as a loss (i.e., taken as a tax deduction). Abandonment - When a property undergoes renovation, such as adding new lighting or a new HVAC system, the old systems are abandoned for accounting purposes.These assets qualify for bonus depreciation. 1245/1250 - After a renovation is completed, some of the assets may be considered personal property by the IRS.With energy costs scheduled to double in some areas over the next five years, you can see how important these savings can be. Energy Savings - Simply put, a new lighting system can reduce your power usage by 50 percent.Utility Rebated - In the same way you get a rebate for buying a new energy-efficient refrigerator, you are also entitled to rebates from the utility for installing energy-efficient lighting.A 200,000-square foot warehouse will generate $120,000 in tax deductions when properly renovated. Have a certification completed and the benefits are a simple line item adjustment to your tax return. EPAct - The Energy Policy Act of 2005 provides for a federal tax deduction of $0.60 per square foot for putting in energy-efficient lighting and the associated controls.What Are the Economic Benefits for Relighting? The question now is how much money do you want to save? And how do you want to save it? With the EPAct and other tax credits and deductions available, and taking into account the reduction of energy costs over time, the potential savings are substantial. Nowadays, the decision to relight or remodel a property is no longer one of aesthetics only.
Lighting accounts for over 70 percent of all retrofits and remodels.