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  4. 179D Federal Tax Deduction

The Internal Revenue Service’s Energy Efficient Commercial Building Property Deduction- Section 179D, allows eligible owners and tenants to deduct up to $1.88 per square foot from their taxable income.

The Inflation Reduction Act (IRA) signed into law by President Biden on August 16, 2022 will increase the maximum allowable benefit from $1.88 per square foot to $5.00 per sq. ft. in 2023.

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 179D tax deduction is a permanent program as part of the consolidated Appropriation Act of 2021, signed into law on December 27, 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.

How Much is My Tax Deduction?

Maximum | $1.88 per square foot

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 square foot

A partial tax deduction of up to $0.60 per square foot 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

How can we help you?

(888) 826-1216