Commercial Property Must Have Heating and Air Conditioning
Heating, ventilation, and air conditioning (HVAC) systems are crucial to the operation of commercial buildings, typically consuming up to 40% of a building’s energy usage. As governments push for greener, more energy-efficient infrastructure, both federal and state incentives have appeared to help commercial property owners offset the cost of HVAC upgrades. Tax deductions, rebates, and financing options – along with fantastic HVAC incentives here in New Jersey, can help investors significantly reduce upfront costs and improve their returns on investment (ROI).
Investors and Building Owners Benefit!
Because of the push for greener, lower-carbon footprints and high-efficiency in buildings, more money-saving incentives than ever before are being offered when HVAC systems are replaced or upgraded.
Investors and building owners benefit from these incentives. An investment now can be dramatically offset by the availability of incentives offered. In other years, an upgrade to a commercial HVAC system would be more of a financial hit than it is now!
Two Huge Federal Incentives for Energy-Efficient HVAC Systems
179D Commercial Buildings Energy Efficiency Tax Deduction
The 179D Tax Deduction allows property owners to deduct between $0.50 and $5.00 per square foot for energy-efficient HVAC systems that meet specific energy reduction criteria. A 100,000 square foot property meeting the energy efficiency criteria could save up to $500,000!
This deduction, updated under the Inflation Reduction Act of 2022, can significantly reduce the cost of upgrading HVAC systems to meet ASHRAE standards.
To qualify for this deduction, your property must attain certification from a licensed engineer that the HVAC system reduces the building’s energy consumption by at least 25%.
Investment Tax Credit (ITC) for Renewable Energy HVAC Systems
Under the Investment Tax Credit (ITC), commercial property owners can claim a 30% credit on the installation costs of renewable energy HVAC systems, such as geothermal heat pumps. This helps offset the higher upfront cost of advanced, energy-efficient systems.
The Federal government recognizes the many advantages to renewable energy. Technology eligible for the Investment Tax Credit not only includes geothermal, but also solar-assisted systems that meet Federal efficiency standards.
These are big incentives. A $500,000 geothermal HVAC installation could yield a $150,000 tax credit. This tax credit savings doesn’t even count the drastically reduced utility bills generated by the property!
Fantastic HVAC Incentives HERE in New Jersey
It’s not just the Federal government that wants to help businesses be more efficient and use less energy.
New Jersey is at the forefront of promoting energy efficiency through several programs that incentivize commercial property owners to invest in modern HVAC systems.
NJ Clean Energy Program (NJCEP) – SmartStart Buildings
The SmartStart Buildings program offers commercial property owners in New Jersey rebates and incentives for energy-efficient HVAC installations. This program covers new construction, major renovations, and equipment upgrades and retrofits in existing buildings.
To be eligible, owners or property managers of commercial buildings must apply through NJCEP before installation, and the equipment must meet specified energy efficiency standards.
Rebates range from $500 to $3,000+ depending on the type and efficiency level of the equipment. For example, a 10-ton air-cooled chiller could qualify for a rebate of $1,300. For projects that fall outside of the prescriptive equipment list, NJCEP offers custom rebates for energy-efficient HVAC installations, based on $0.16 per kWh of electricity saved or $1.60 per therm of natural gas saved annually.
Combined Heat and Power (CHP) Incentives
New Jersey encourages the use of Combined Heat and Power (CHP) systems, which are highly efficient HVAC systems that simultaneously generate electricity and useful heat. The most common types are combustion turbines, or reciprocating engines, with heat recovery units or steam boilers with steam turbines.
Most CHP systems use waste heat.
Through NJCEP, property owners can receive financial incentives to install CHP systems in commercial buildings with potential savings of .60 per Watt to $2.00 per Watt of installed capacity, depending on system size.
To qualify for this incentive, CHP systems must meet specific efficiency requirements, and applications must be submitted to NJCEP.
Local Utility Rebates (e.g., PSE&G and JCP&L)
Utilities like Public Service Electric & Gas (PSE&G) and Jersey Central Power & Light (JCP&L) offer their own rebate programs to incentivize energy-efficient HVAC upgrades. These rebates can significantly lower the initial cost of energy-efficient equipment.
Currently, PSE&G offers rebates of up to $250 per ton for qualifying high-efficiency HVAC systems.
Most Exciting of All!
Elite Heating and Air Conditioning is an approved Small Business Direct Installer! (SBDI)
The Small Business Direct Installer works with small business to assess their current heating system and determine the best upgrades. Local utilities will pay up to 80% of installation costs in some cases.
But that’s not all the good news.
Not only would businesses working with Elite Heating and Air Conditioning as a Small Business Direct Installer receive rebates on the costs of installing a new system, but qualifying customers would be eligible for 0% financing for up to a five-year term.
Impressive and exciting!
How Investors Can Leverage Federal and New Jersey Incentives to Boost Returns
Lower Upfront Costs
Incentives like NJCEP’s SmartStart Buildings rebates and PECO’s HVAC rebates can significantly reduce upfront costs. For example, a 10-ton HVAC system installed in New Jersey might receive $2,000 in rebates from NJCEP.
Increase Property Value and Appeal
Incentives for energy-efficient HVAC systems don’t just lower costs—they also increase a property’s appeal to tenants and investors. Energy-efficient buildings can command higher rents and sales prices, with research from the Institute for Market Transformation (IMT) showing a 13% premium on energy-efficient properties. These upgrades also improve tenant retention, as energy-efficient buildings often provide better indoor comfort at lower operating costs.
Reduce Operating Expenses
Upgraded, energy-efficient HVAC systems can reduce energy consumption by 15-30%, translating into lower operating expenses. A commercial property with annual energy costs of $250,000 could save between $37,500 and $75,000 annually through energy-efficient HVAC upgrades, depending on system efficiency and usage patterns.
Sustainable Financing Options
Programs like C-PACE financing in New Jersey allow property owners to finance energy-efficient HVAC upgrades without upfront costs, spreading the payments over 10-20 years through property taxes. This long-term repayment structure is especially attractive for real estate investors looking to maintain liquidity while reducing energy costs.
How to Save Money Now
From rebates and grants to tax deductions and financing options, Federal and State incentives help reduce the initial cost of HVAC investments while boosting the long-term returns. With energy efficiency becoming a growing priority for tenants, investors, and regulatory bodies, now is the time for commercial property owners to take advantage of these programs and future-proof their investments.
Upgrading your HVAC is, in reality, a smart, long-term financial investment, giving you fantastic incentives and lowered costs for years in the future!
Elite Heating and Air Conditioning Can Help
You don’t have to know everything about heating and cooling commercial properties. That’s our job. We are masters of equipment, installation, and customer service. We are also experts in helping you find the best financing, rebates, and tax credit options available.
“No excuses. Just results.”
Call us.
