179D Find Out if You Qualify for the Now Permanent 179D Tax Deduction Ready to get started? Find out if you qualify by filling out the form below and one of our 179D Tax Deduction experts will contact you. REQUEST A PROPOSAL Find Out if You
Qualify for the
179D Tax Deduction

What is the EPAct 179D Tax Deduction?

The Energy-Efficient Commercial Buildings 179D Tax Deduction originally made effective on 1/1/2006, is a significant financial incentive geared towards: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 tax-exempt buildings

To qualify, newly constructed buildings along with improvements to existing buildings must meet or exceed certain energy reduction requirements. Recent tax legislation changes made 179D permanent in 2020, then significantly expanded both the value and scope of 179D in 2022.

The 179D Energy Efficient Commercial Buildings Deduction offers a tax deduction of up to $5.00/sf to those investing in energy-efficient improvements placed in service after December 31, 2005. 179D is available for up to $1.88/sf in 2022 and up to $5.00/sf in 2023 for Architects, Engineers, and Design-Build Contractors of tax-exempt buildings as well as commercial building owners.

Eligibility Expansion in 2023 and forward includes Tax-Exempt Entities

In 2022 and prior years Architects, Engineers, and Design-Build contractors are eligible to receive allocations on projects they designed for federal, state, and local government-owned buildings. Starting in 2023 they can now ALSO receive allocations for their design work on the tax-exempt entities listed below. This means many building types that were previously ineligible to participate in 179D now can!

Now eligible tax-exempt entities include:

  1. charitable organizations,
  2. churches & religious organizations,
  3. private schools & universities,
  4. private foundations,
  5. political organizations,
  6. other non-profits,
  7. Native American tribal governments, and
  8. Alaska Native Corporations

What are the Benefits of the 179D Tax Deduction?

Size of Improvement
Partial Tax Deductions Available Prior to 2023
Maximum Tax Deduction 2022
Maximum Tax Deduction 2023
Lighting
HVAC
Envelope
50,000 sf
$15.75K - $31.5K
$31.5K
$31.5K
$94K
$250K
100,000 sf
$31.5K - $63K
$63K
$63K
$188K
$500K
300,000 sf
$94.5K - $189K
$189K
$189K
$564K
$1,500K

Who are Ideal Candidates for the 179D Tax Deduction?

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.

What is the Process for Claiming 179D Tax Deduction?

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.

What Improvements are Eligible for the 179D Deduction?

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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