Section 179D Federal Tax Deduction for Energy Efficient Buildings

Section 179D, the Energy Efficient Building Deduction, gives eligible owners and tenants a tax deduction of up to $1.80 per SF. The tax deduction may be claimed by:

  • Owners or Tenants of commercial buildings of any height
  • Owners of multifamily buildings over 4 stories
  • Designer / Engineer may claim tax credit on Government-owned buildings

The deduction is available in the year the building is placed in service. Recent legislation now extends the tax deduction to buildings placed in service through 12-31-2020.

Qualifying Buildings

  • Retail
  • Office
  • Senior Centers
  • Industrial
  • Commercial
  • Warehouses
  • Multifamily (minimum 4 stories)

What Systems Qualify?

Building Envelope    |     HVAC & Hot Water Heating     |     Interior Lighting

To qualify, the total building energy and power costs must be at least 50% below a comparable building that meets ASHRAE 90.1-2007 standards.

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.

How Much is My Tax Deduction? 

Maximum | $1.80 per SF.  The maximum tax deduction may be claimed if the whole building meets the 50% below ASHRAE 90.1-2007 standard.

Partial | $0.30 to $0.60 per SF.  A partial tax deduction of up to $0.60 per SF may be claimed when systems meet these target savings compared to the ASHRAE standard:

  • Building envelope at least 10% below
  • HVAC & Hot Water Heating at least 15% below
  • Interior Lighting at least 25% below

Example

  • 100,000 SF commercial building 
  • Placed in service 2018
  • Qualifies for tax credit through energy efficient design of building envelope and mechanical systems
  • Verified improvements exceeded 50% ASHRAE 90.1-2007 threshold. May qualify for maximum tax deduction of $1.80 per SF X 100,000 SF 

   Potential tax credit: $180,000