Get a Tax Deduction for Energy Efficiency
Did you know there’s a tax deduction of up to $1.80 per square foot for notably reducing energy and power costs in new or renovated government-owned buildings? Architects, engineers, and contractors may qualify for the 179D tax deduction. Seek guidance from our tax and financial advisors to learn more.
The 179D Energy Tax Deduction, Explained
The 179D energy tax deduction (enacted as part of the Energy Policy Act of 2005) is an engineer-based tax incentive for significantly reducing energy and power costs in commercial buildings, specifically interior lighting, HVAC, and building envelopes. It allows for a tax deduction of up to $1.80 per square foot. The deduction may be claimed for new construction or improvements placed into service after Jan. 1, 2006.
A Change in Accounting Method may be used for commercial building owners to take the deductions retroactively. Designers of government-owned buildings can take the IRS 179D tax deduction for all “open” tax years, which generally allows three years from the filing date (buildings placed in service earlier than that require an amended return).
What Buildings Qualify?
Many building types qualify for the 179D energy tax deduction, including everything from ground-up construction to improvements on existing buildings.
- Commercial buildings of any type
- Residential buildings of 4 stories or more
- Government-owned buildings (such as courthouses, libraries, universities, transportation facilities)
- Parking garages
Who Can Benefit?
If you own commercial or apartment buildings or are involved in the design of government buildings, you may qualify for the 179D tax deduction.
- For-profit owners of commercial buildings
- For-profit owners of apartment buildings that are 4 stories or more
- Designers of government buildings (architects, engineers, ESCOs, and energy consultants)
We’ll help you determine if you qualify for the 179D tax deduction—here are the certification requirements:
- The energy and power cost savings calculations must be performed with Department of Energy-approved software.
- Field inspections must be performed after the energy-efficient property has been placed into service in accordance with NREL Guidelines.
- Certifications and inspections must be completed by a qualified engineer or contractor in the jurisdiction of the qualifying building.
- The taxpayer shall maintain the certification in their records to establish the entitlement to, and amount of, the deduction claimed.
Save Up To $1.80 Per Square Foot of Improved Space
The 179D tax deduction requires the taxpayer’s building to meet or exceed a 50% savings in energy and power costs when compared to a theoretical ASHRAE 90.1-2007 baseline building.
$0.60 / Square Foot
For construction or improvement of lighting systems that meet 25% savings.
$0.60 / Square Foot
For improvements relating to energy-efficient HVAC systems meeting 50% savings.
$0.60 / Square Foot
For building envelope systems (walls, windows, roofs, and doors) meeting 10% savings.
179D Tax Deduction FAQs
Does my CPA already do this?
Do I have to get a certification to take the deduction?
Does it matter when I take the 179D deduction?
What if I didn’t take the deduction the year the building was finished?
How much does it cost and how much will I save?
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Start by scheduling a meeting for a free consultation. Let’s talk about the specialty tax programs that can equate to significant savings.