May/June 2021 Tax Tips

Are you eligible for energy-efficiency tax breaks?

The Consolidated Appropriations Act (CAA) extended certain tax breaks for energy-efficient buildings that were set to expire at the end of 2020. So, now may be a good time for eligible real estate owners and developers to review the potential benefits.

First, the CAA made permanent the Section 179D commercial buildings energy-efficiency tax deduction. Sec. 179D allows commercial building owners (and certain lessees) to deduct up to $1.80 per square foot for the installation of qualifying energy-efficient lighting, HVAC, and building envelope systems in new or existing buildings. Architects, engineers or contractors who design government-owned energy-efficient buildings may also be able to claim the deduction.

The CAA also extended, through the end of 2021, the Section 45L tax credit. Sec. 45L provides eligible home builders and apartment developers with a credit of up to $2,000 for each new dwelling unit that meets certain energy-efficiency standards.

Take advantage of the Work Opportunity Tax Credit

As the economy recovers from the COVID-19 pandemic, many businesses will need to hire new employees. If your business is in the same boat, consider the potential benefits of the Work Opportunity Tax Credit (WOTC). Extended by the CAA through 2025, the WOTC can reduce taxes by as much as $2,400 per hire for companies that hire workers from certain disadvantaged groups, such as ex-felons, food stamp and welfare recipients, unemployed veterans, certain empowerment zone residents, and disabled workers referred by a qualified vocational rehab program.

To qualify for the credit, a company must complete specific paperwork and take certain other steps before extending a job offer. So, be sure to familiarize yourself with the requirements and screen all applicants for WOTC eligibility.

Charitable deduction for non-itemizers extended through 2021

Ever since the Tax Cuts and Jobs Act nearly doubled the standard deduction, far fewer taxpayers are itemizing deductions. Generally, taxpayers who don’t itemize are unable to deduct charitable contributions. But last year’s CARES Act provided non-itemizers with an above-the-line deduction (in other words, a deduction from gross income in calculating adjusted gross income) of up to $300 in eligible donations in 2020.

The deduction was available only for cash gifts to public charities other than donor-advised funds or supporting organizations. There was some uncertainty about whether joint filers were entitled to a $600 above-the-line deduction, but in the 2020 instructions to Form 1040, the IRS clarified that the $300 deduction limit applied to both individuals and married couples filing jointly. The CAA extended the above-the-line charitable deduction through 2021 and increased the deduction to $600 for joint filers.

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