Section 179D Deduction for LED Lighting

Last year, my client purchased and installed LED lighting in their commercial warehouse. The system saved more than the 50% requirement for a section 179D deduction. Since the total cost of system is below the $1,040,000 limit for general 179 deductions, why not take the whole system cost of as a section 179 as opposed to a lesser amount for 179D?

While the root of Section 179 and Section 179D in the tax card are very similar, they are different provisions of the tax code and have different definitions for qualifying property. The aforementioned property mentioned in LED lighting is considered qualified Section 179D property, but not qualified Section 179 property. Thus, you would not be able to simply deduct the full cost of the installed LED lighting as would be the case with Section 179 or $1,040,000. Rather, it is based on the product square footage and the qualifying deduction multiplier of either $1.80 or $0.60. If you only qualify for lighting and not the other elements such as HVAC and Business Envelope, then your client would be allowed $0.60 as the multiplier.

References: Section 179D; ASHRAE 90.1-2001
State: California

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