The Best Federal Tax Incentive You Never Knew Existed
The Energy Policy Act of 2005 (EPAct) created the Section 179D Energy Efficient Commercial Building Deduction as a tax incentive to encourage energy-efficient design. It applies to newly constructed and renovated buildings targeting HVAC and lighting systems and the building envelope. The Section 179D Deduction is available to commercial building owners as well as engineers, architects, and other designers of buildings owned by government agencies and other tax-exempt entities.
» Learn about the Section 179D Deduction for 2022 and prior.
SECTION 179D DEDUCTION BENEFITS AND REQUIREMENTS
Starting in 2024, the maximum Section 179D Deduction increases to $5.65 per square foot, as follows:
- When constructed with prevailing wages and apprenticeship requirements, the Section 179D Deduction starts at $2.50 per square foot when compared to the ASHRAE Reference Standard 90.1, which was in effect for four years before the in-service date of the building. Each additional percentage of reduction will increase the deduction by $.10, up to $5.65 per square foot.
- The Section 179D Deduction is $.50 per square foot if prevailing wage requirements are not met. Each additional percentage of reduction will increase the deduction by $0.02 per square foot, up to $1.00 per square foot.
The Section 179D Deduction can be taken every three tax years when the building is placed in service in 2023 and thereafter (four in some situations).
- Example: If a taxpayer constructed a building in 2008 and took a deduction of $1.80 per square foot, prior rules prevented taking additional Section 179D Deductions for any subsequent energy efficiency improvements. Beginning in 2023, the Inflation Reduction Act allows for additional Section 179D Deductions for subsequent energy improvements.
Architects, Engineers, And Others Can Benefit From Design Work On Tax-Exempt Entities
For buildings placed in service in 2023 and after, engineers, architects, and other designers can obtain Section179D Deductions from tax-exempt entities, including:
- Public Organizations, such as:
- K-12 Schools, higher education, and libraries.
- Municipal buildings (police, fire stations, courthouses, and more).
- Public offices, and parking garages, airport terminals.
- Other Tax-Exempt Entities, such as:
- Charitable organizations.
- Religious institutions.
- Private schools and colleges
- Non-profit hospitals.
- Private museums.
- Tribal governments.
- Any other organization falling under Section 501(c).
Our Service
Our national infrastructure of engineers, CPAs and tax attorneys specialize in Section 179D and will perform a complimentary feasibility study to prequalify your project. Our Section 179D services include:
- Performing modeling and building inspections.
- Reviewing construction documents.
- Facilitating project scope interviews with the design team.
- Preparing certificates of energy efficiencies.
- Obtaining allocations from government building owners.
- Assisting with amended tax returns or filing a change in method of accounting.
- Coordinating with your tax preparer.
- Providing complimentary audit support.
SECTION 179D DEDUCTION FOR 2022 AND PRIOR
For buildings placed in service from 2006 through 2022, the Section 179D Deduction allows building owners to claim up to $1.80 per square foot. In the case of a taxable year beginning after 2020, the $1.80 per square foot will be adjusted by inflation ($1.82 for 2021 and $1.88 for 2022).
To qualify, newly constructed or renovated buildings must meet or exceed the ASHRAE standards for HVAC, building envelope, and interior lighting. The Section 179D Deduction is available to commercial building owners as well as engineers, architects, and design contractors of government-owned buildings. The building can be newly constructed or retrofitted with system improvements. Parking garages and residential buildings with four or more stories may also be eligible.
- For commercial building owners, the project must be completed on or after 2006 through 2022.
- The deduction for designers of government-owned buildings can go back to any open tax year (generally three years). The building must be a government project, including:
- K-12 Schools, higher education, and libraries.
- Municipal buildings (police, fire stations, courthouses, and more).
- Public offices, and parking garages, airport terminals.
OUR CERTIFIED DELIVERABLES ARE ALL BACKED BY LEXICON’S AUDIT DEFENSE PROTECTION FREE OF ANY ADDITIONAL COST, MEMBERSHIP, OR COMMITMENT.
Getting in touch is easy!
We help U.S.-based businesses all around the country determine their Section 179D eligibility and will demonstrate why Lexicon is the foremost specialty firm for this government-sponsored federal tax incentive.
One of our Section 179D specialists will respond within twenty-four hours.