Maximize Your Savings with Section 179D Deduction: A Complete Guide

Improving Business Performance Through Sustainability & ESG

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§179D Energy Efficient Commercial Building Tax Deduction Calculator

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        Please note that the estimates provided by this §179D Energy Efficient Commercial Building Property Deduction calculator are based on the information you have provided and should not be solely relied upon for claiming deductions under §179D of the United States Internal Revenue Code. The calculator may not fully account for all factors that could affect your eligibility for these deductions, and the information provided is of a general nature and should not be construed as legal, accounting, or tax advice. It is recommended that you seek advice from a qualified professional for specific guidance on your unique situation. Use of this calculator is at your own risk.

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        Please note that the estimates provided by this §179D Energy Efficient Commercial Building Property Deduction calculator are based on the information you have provided and should not be solely relied upon for claiming deductions under §179D of the United States Internal Revenue Code. The calculator may not fully account for all factors that could affect your eligibility for these deductions, and the information provided is of a general nature and should not be construed as legal, accounting, or tax advice. It is recommended that you seek advice from a qualified professional for specific guidance on your unique situation. Use of this calculator is at your own risk.

        What is the 179D Tax Deduction
        and who can benefit from it?

        The Energy-Efficient Commercial Building Tax Deduction, also known as Section 179D, is a federal incentive designed to promote energy efficiency in commercial buildings.

        It rewards qualifying building owners and eligible designers for making energy-efficient improvements, with eligible projects including new construction, renovation, and additions.

        What types of buildings qualify
        for the 179D Tax Deduction?

        Commercial Buildings
        This includes office buildings, retail stores, warehouses, hotels, and residential properties four stories and above, etc.

        Tax-Exempt & Government-Owned Buildings
        Tax-exempt organizations, buildings owned by federal, state, local, or tribal governments, including schools, universities, libraries, local municipalities, recreational centers, hospitals, military bases, 501(c)(3) nonprofits, tribal lands, and churches, may allocate the deduction to a qualified designer.

        Who qualifies for the
        179D Tax Deduction?

        • Building Professionals

          Architects, engineers, contractors, and energy consultants work on energy-efficient upgrades in commercial buildings.

        • Commercial Building Owners

          Owners of commercial buildings who make eligible energy-efficient upgrades or improvements to their properties.

        • Real Estate Investment Trusts (REITs)

          REITs that own and operate commercial buildings and make qualifying energy-efficient improvements can also claim the 179D Tax Deduction.

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        Combined, our experts have conducted over 10,000 energy studies, including energy modeling, site inspections, and certifications of results. We would love to answer all of your questions.

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        Are residential buildings eligible
        for the 179D Tax Deductio        n?

        Yes, some buildings that are considered residential in use can be eligible for the 179D tax deduction if they are 4 stories or higher above grade.

        Common examples of buildings that are considered residential in use that can qualify for the 179D tax deduction are Mid- to High-Rise Apartment complexes and Mixed-Use buildings.

        Can government entities claim the 179D Tax Deduction for their buildings?

        Yes, government-owned buildings and other nontaxable entities do not pay federal taxes, but they are still eligible for the 179D Tax Deduction. However, in the case of government-owned buildings, the deduction can be allocated to the primary designer of the energy-efficient improvements. This designer can be an architect, engineer, contractor, or any other individual or firm responsible for designing the qualifying energy improvements.

        What energy-saving measures are eligible for the 179D?

        To qualify for the 179D deduction, a building must meet the energy-efficiency standards established by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE). These standards are designed to enhance energy efficiency in three key areas:
        • Lightbulb
          Interior Lighting Systems

          Upgrading or installing lighting systems to more energy-efficient technologies, such as LED lighting, that reduce energy consumption.

        • Hvac
          HVAC Systems

          Installing new equipment or implementing improvements in heating, ventilation, and air conditioning systems to optimize energy usage.

        • Roofing
          Building Envelope

          Installing new equipment or implementing improvements in heating, ventilation, and air conditioning systems to optimize energy usage.

        How much can I save with the 179D Tax Deduction?

        The 179D Tax Deduction, which provides incentives for energy-efficient building design and construction, underwent significant changes as part of the Inflation Reduction Act of 2022 (IRA). For buildings placed into service beginning in 2023, the maximum deduction has increased to $5.00 per square foot, up from the previous limit of $1.88 per square foot. For example, if your qualified project covers 50,000 square feet, you could potentially receive up to $250,000 in tax deductions.

        Tax Scenario §179D

        We visited an office building in California that had undergone a gut renovation. We were able to incorporate the existed building envelope into the IRS required energy model and the building was able to reach a full deduction.
        • Type of Property Industrial and Office Building
        • Size of Building 109,425 sq. ft.
        • Building Placed in Service 2022

        DEDUCTION AMOUNT

        $205,719 Start your claim arrow_outward arrow_outward

        Tax Scenario §179D

        We visited a high school in Illinois that has recently updated their lighting and central boiler through a local bond update. In a one-hour inspection one of our in-house professional engineers was able to collect additional documentation and the property was able to reach a full tax deduction
        • Type of Property High School
        • Size of Building 279,352 sq. ft.
        • Building Placed in Service 2020

        DEDUCTION AMOUNT

        $502,833.60 Start your claim arrow_outward arrow_outward

        Tax Scenario §179D

        We visited a new build county hospital in Arizona the building reached a full tax deduction. The onsite inspection by our in-house professional engineer took one hour
        • Type of Property Hospital
        • Size of Property 74,893 sq. ft.
        • Building Placed in Service 2021

        TAX DEDUCTION

        $136,305.26 Start your claim arrow_outward arrow_outward

        Tax Scenario §179D

        We visited a parking garage in North Carolina, and we were able to generate the interim lighting deduction for parking garages and our client received $253,908.23
        • Type of Building Parking Garage
        • Size of Building 416,243 sq. ft.
        • Building Placed in Service 2021

        TAX DEDUCTION

        $253,908.23 Start your claim arrow_outward arrow_outward

        What documentation is required to claim the
        179D Tax Deduction?

        To determine if your building qualifies for the 179D tax deduction, you need to conduct an energy analysis and assess the energy-saving measures implemented. Consulting with energy efficiency experts or engineering firms with experience in 179D deductions can help you evaluate your building’s eligibility and potential savings.

        Description

        Certification Statement

        Certification statement from a qualified individual or firm stating that the building meets the energy-efficiency requirements

          Inventory

          Energy Modeling Reports

          Energy modeling reports, plans and specifications of the energy-efficient improvements

            Task

            Supporting Documentation

            Any other supporting documentation required by the Internal Revenue Service (IRS)

              FAQs

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              Can I claim the 179D Tax Deduction for improvements made several years ago? keyboard_arrow_down keyboard_arrow_up

              Yes, you can. For commercial building owners, if your building meets the eligibility criteria and the improvements were made after January 1, 2006, you can still claim the 179D Tax Deduction. For eligible designers of nontaxable property, there is only a three-year look-back period. It’s never too late to explore potential savings.

              Can I claim the 179D Tax Deduction if my building has already received other energy-related incentives or rebates? keyboard_arrow_down keyboard_arrow_up

              Yes, you can still claim the 179D tax deduction even if your building has received other energy-related incentives or rebates. However, it’s important to note that you cannot “double-dip” and claim the same expenses for both the 179D deduction and other incentives. You must adjust the total deduction amount to avoid duplication and ensure compliance with tax regulations.

              Can I claim the 179D Tax Deduction if my building has already been certified under LEED or other green building programs? keyboard_arrow_down keyboard_arrow_up

              Yes, certification under Leadership in Energy and Environmental Design (LEED) or other green building programs does not disqualify you from claiming the 179D tax deduction. The certification process for programs like LEED often involves meeting or exceeding certain energy-efficiency standards, which can align with the requirements for the 179D deduction. By demonstrating compliance with these programs, you may also have the documentation needed to support your 179D tax deduction claim.

              Can I claim the 179D Tax Deduction for retrofits that were performed several years ago, but the building is still in use and meets the energy-efficiency requirements? keyboard_arrow_down keyboard_arrow_up

              Yes, you can claim the 179D tax deduction for retrofits performed in previous years, as long as they meet the required energy-efficiency standards and fall within the qualifying period (January 1, 2006, to December 31, 2023). There is no time limitation for claiming the deduction, so if your building improvements qualify, you can still take advantage of the savings even for older retrofits.

              Can I claim the 179D Tax Deduction for multiple qualifying projects? keyboard_arrow_down keyboard_arrow_up

              Yes, you can claim the 179D tax deduction for multiple qualifying projects. Each eligible project is treated as a separate deduction with its own 179D Study, allowing you to maximize savings for all energy-efficient improvements made within the designated qualifying period.

              How can I ensure that I’m maximizing my 179D Tax Deduction? keyboard_arrow_down keyboard_arrow_up

              While the 179D Tax Deduction offers lucrative savings, navigating the complexities of tax regulations can be challenging. Seeking assistance from professionals experienced in energy efficiency and tax law is highly recommended. Engaging with consultants who do not outsource any portion of the study is also recommended for maximizing your deductions. Working with expertise in this area can help you identify eligible projects, accurately calculate deductions, and ensure that all documentation is correctly prepared.

              Is there a deadline for claiming the 179D Tax Deduction? keyboard_arrow_down keyboard_arrow_up

              Yes, there is a deadline to consider. For commercial building owners to claim the 179D deduction, the eligible building improvements must have been made after January 1, 2006. For eligible designers of nontaxable property, there is only a three-year look-back period. Therefore, if you’ve made qualifying improvements during this period and haven’t yet claimed the deduction, it’s essential to take action before the deadline.

              Can nonprofits and tax-exempt organizations claim the 179D Tax Deduction? keyboard_arrow_down keyboard_arrow_up

              No, nonprofits and tax-exempt organizations that do not have a tax liability cannot directly benefit from the 179D tax deduction.

              However, these organizations often partner with eligible designers, such as architects, engineers, or contractors, to allocate the deduction to the designer in exchange for other considerations or cost savings. This way, the benefit directly flows to the tax-paying parties involved.