179D Tax Deduction

The Energy-Efficient Commercial Buildings Tax Deduction, originally made effective on 1/1/2006, is a significant financial incentive geared towards:

• Building owners (commercial or multifamily)
• Tenants making improvements
• Architects, engineers, and other designers of government buildings

To qualify, newly constructed buildings along with improvements to existing buildings must meet or exceed certain energy reduction requirements. Recent tax legislation extended the Energy Efficient Commercial Buildings Deduction, offering a tax deduction of up to $1.80/sf to those investing in energy efficient improvements placed in service after December 31, 2005.

179D Benefits

Size of Improvement
Partial Tax Deductions For...
Full Tax Deduction
Lighting
HVAC
Envelope
50,000 sf
$15K - $30K
$30K
$30K
$90K
100,000 sf
$30K - $60K
$60K
$60K
$180K
300,000 sf
$90K - $180K
$180K
$180K
$540K

Are You an Ideal Candidate?

Unlike most deductions, which are based on the amount spent, this deduction is primarily based on affected square footages. Ideal candidates will generally have improvements with a square footage of at least 50,000 square feet. A wide range of improvements, from simple lighting retrofits to full-scale construction projects, qualify for this timely tax break. Other great candidates include regional or national chains with multiple locations.

The Process

The basis for developing and supporting this deduction is a detailed engineering analysis, as prescribed by the IRS. Our multi-disciplinary team of engineers and tax experts will ensure that you obtain the maximum available deductions while following IRS guidance to properly certify the tax deductions. Additionally, our team can help you claim deductions that were missed from prior years.

Eligible Improvements

Taxpayers that invest in ground-up construction or in improvements to their existing buildings are potentially eligible for 179D deductions. Eligible improvements must reduce energy use by making investments in any of the following categories: a building’s envelope, HVAC, and/or interior lighting systems. There are different ways to pursue a deduction and all require comparison to the ASHRAE Standards and certification by a qualified individual.

Building Envelope

Energy efficient construction or improvements to walls, floors, roofs, fenestrations, and doors

HVAC

Improvements relating to energy efficient HVAC systems

Lights

Construction or improvements to building lights for energy efficiency

179D Tax Insights

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