SECTION 179D ENERGY EFFICIENT INCENTIVES
- Tax Deductions for Construction or Retrofitting Commercial Buildings with Energy Efficiencies
- New Rules Provide for Up to $5.65 Per Sq Ft
- Available to Owners, Architects, Engineers and Contractors
What we are offered to help you with…
- Maximum Tax Benefit
Up to $5.65 per square feet in immediate tax deductions for qualifying buildings
- Retroactive Claims
Claim benefits for buildings placed in service since 2006 without amending returns
- Multiple Building Systems
Qualify through improvements to lighting, HVAC, or building envelope
- No Project Size Limit
Available for both new construction and renovations of any scale
Determine If You Qualify
Here's how our in-depth process works.
Initial Consultation
Our experts will help identify properties that may qualify and give an overview of what is required with a study and our overall process
Feasibility Review
Our team evaluates your building’s specifications, energy systems, and design documentation to determine qualification potential. We provide a preliminary estimate of tax deductions based on your property’s square footage and energy-efficient improvements.
Inspection and Engineering Analysis
Our engineers conduct detailed energy modeling using IRS-approved software to verify your building meets federal energy reduction targets. We analyze lighting, HVAC, and building envelope systems to document energy performance improvements.
Report and Certification
We deliver a comprehensive certification package including energy analysis results, supporting calculations, and required IRS documentation. This enables you and your tax professional to claim the maximum eligible deduction for your property.
FAQs
Learn More About 179D Deductions
What is the 179D tax deduction?
The 179D tax deduction is an incentive for designing energy-efficient commercial buildings. Building owners can claim a tax deduction for installing qualifying energy-efficient systems.
What types of buildings qualify for the 179D deduction?
Qualifying buildings include commercial buildings and multi-family residential buildings four stories or higher. Government or tax-exempt owned buildings (with allocation letter). This includes offices, retail spaces, industrial buildings, warehouses, parking garages, and apartment complexes.
What types of properties do not qualify for the 179D deduction?
Single-family homes, Multi-family residential buildings of three or fewer stories above grade, manufactured homes, buildings without fossil fuel or electricity, cold storage building (if they are primarily for refrigeration).
How do I know if my property qualifies?
A §179D feasibility test and calculation must be completed by professionals with the expertise and required accreditations. The calculations must be conducted using Department of Energy-approved software by a qualified engineer or contractor who is authorized to inspect and certify properties in the building’s jurisdiction.
What energy systems can qualify for the 179D deduction?
The deduction applies to three types of systems:
⦁ Interior lighting
⦁ Building envelope (roof, walls, windows, doors)
⦁ Heating, cooling, ventilation, and hot water systems
How much is the 179D deduction worth?
The deduction can be up to $5 per square foot for buildings that achieve a 50% reduction in energy costs compared to a reference building. Partial deductions of $0.60 per square foot are available for each qualifying system.
Who can claim the 179D deduction?
The deduction can be claimed by building owners, tenants, or designers of government-owned buildings.
Can the 179D deduction be claimed for retrofits or renovations?
Yes, the deduction can be claimed for both new construction and renovations of existing buildings.
What documentation is needed to claim the 179D deduction?
You’ll need certification from a qualified individual (like a licensed engineer or contractor) that the required energy savings have been achieved. This typically involves energy modeling software to demonstrate the energy cost reductions.
How long has the 179D deduction been available?
The 179D deduction was first enacted in 2005 and has been extended and modified several times. It was made permanent in 2020 and expanded in 2022 under the Inflation Reduction Act.
What documents are required if my business performed §179D work on a government-owned building?
You would need to obtain an allocation letter from that government entity that transfers the Section §179D benefit directly to you. At Legacy Tax & Resolution Services, our team handles this process from start to finish on your behalf.Does the date that construction was completed matter?
There has been a significant change in the eligibility of the deduction for taxpayers, which depends on the placed-in-service date of the property. The dates of differentiation are:
Does the date that construction was completed matter?
There has been a significant change in the eligibility of the deduction for taxpayers, which depends on the placed-in-service date of the property. The dates of differentiation are:
Properties placed into service prior to January 1st, 2023, and those after January 1st, 2023.
Do LED lights qualify for §179D tax credit?
Yes, according to The Energy Policy Act of 2005, LED lighting qualifies for the §179D tax deduction. The tax deduction varies linearly from $0.30 per square foot at 25% lighting power density reduction (LPD) to $0.60 per square foot at 40% lighting power density reduction (LPD). The LPD reduction is determined by comparing with ASHRAE 90.1 standards. For warehouses, this requirement increases to a 50% LPD reduction.
Lighting systems must include automatic controls prescribed in the ASHRAE 90.1 standard and a provision for bi-level switching in all spaces except hotel and motel guest rooms, storerooms, restrooms, and public lobbies. The illuminance levels must meet the minimum requirements as per the IESNA lighting handbook.
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