Section 179D Federal Tax Deduction for Energy Efficient Buildings

Section 179D of the federal tax code provides a deduction for qualifying owners of commercial buildings. The deduction offsets the cost of energy efficient improvements made in  1) building envelope, 2) HVAC systems, and/or 3) interim lighting.

The Section 179D deduction has been EXTENDED
to include buildings placed in service through 2020. 

Threshold

To qualify, completed improvements must reduce total energy usage by 50% or more, compared to a building that meets ASHRAE 90.1-2007 (buildings 2016 or later).

Energy modeling is required to justify the deduction. Improvements must be inspected and tested by a qualified engineer. Partner Energy engineers use IRS-approved software to model the energy consumption of your building to determine whether the completed improvements meet the minimum requirements to qualify. We recommend you consult your own tax, legal, and accounting advisors for further information, including eligibility details.

Deduction Amount

Maximum | $1.80 per SF of building envelope. Deductions of $0.60 per SF for verified improvements in building envelope, HVAC systems, or interim lighting systems. Improving more systems increases your deduction.

Partial | $0.30 to $0.60 per SF.  Interim lighting measures that result in a 25-40% reduction in lighting power density qualify for partial deduction.

Qualifying Buildings

Retail | Office | Industrial | Commercial | Multifamily (min 4 stories) | Warehouses