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

Improving Business Performance Through Sustainability & ESG

§179D Energy Efficient Commercial Building Tax Deduction Calculator

You can save up to:

£ 00,000.00*

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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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.

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 or enhancing the building’s insulation, windows, and roofing to reduce heat gain/loss and improve energy efficiency.

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.

FAQs

All you need to know about 179D Deduction

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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 I claim the 179D 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.

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.

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

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.