Tax Deduction for Energy-Efficient Buildings – Section 179D Deduction
Often Overlooked Tax Deduction for Energy-Efficient Buildings
Did you know that there’s a tax deduction available for making energy-efficient improvements to commercial buildings (and multi-family residential buildings if 4 floors or higher)?
It’s called the Section 179D deduction,
and it’s a valuable incentive that many building owners and designers are missing out on.
Here’s a quick breakdown of this tax strategy:
What is it?
Section 179D allows a deduction of up to $5 per square foot for energy-efficient commercial building property,
including interior lighting,
building envelope,
and mechanical systems like HVAC.
Who can benefit?
Government-owned buildings:
The designers (architects, engineers, contractors) can claim the deduction.
Privately-owned buildings:
Building owners and tenants who pay for energy-efficient improvements can benefit.
Certain tax-exempt organizations like
nonprofit hospitals can allocate the deduction to designers.
How much is it worth?
The deduction was recently enhanced by the Inflation Reduction Act, making it even more valuable.
For projects completed in 2023, the deduction is up to $5.36 per square foot,
and it can go up to $5.65 per square foot in 2024.
Additional bonus deductions are available for meeting prevailing wage and apprenticeship requirements.
How do you claim it?
To claim the deduction, energy savings must be certified by a qualified professional, like a licensed engineer,
who will conduct a site visit and energy modeling.
This deduction can lead to significant tax savings,
especially for businesses with large building portfolios.
If you own or design commercial buildings,
it’s worth exploring whether you qualify for the Section 179D energy-efficient tax deduction.
Let me know if you have any questions or want to learn more about this often-overlooked tax strategy!
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