If you are the owner of a commercial building, or involved in the design or construction of a government owned or not-for-profit building, you may qualify for newly improved tax deductions under the Inflation Reduction Act of up to $5.65 per square foot for energy-efficiency improvements.
EPAct 179D Deduction Levels
The maximum allowable benefit increased from $1.88/sf in 2022, to:
- $5.65/sf in 2024
- $5.36/sf in 2023
Prior to 2022,
- In 2021, the maximum deduction was $1.82/sf
- In 2006-2020, the maximum deduction was $1.80/sf
- Overall building energy usage must be more efficient than standard by specified thresholds
What the EPAct 179D means for you:
- Potential for immediate tax benefits in-lieu of depreciation. Building owners are not required to file amended tax returns for previous projects.
- Deductions are for installation of, or improvements to:
- Energy-efficient lighting,
- HVAC, or
- Building envelope.
- Maximized benefit requires prevailing wage on construction for projects in service on 1/29/2023 and later
- Safe Harbor exists for buildings that started construction prior to 1/29/2023 with no requirement of prevailing wage.
Which properties qualify?
New construction and renovations include:
- Commercial buildings of any size
- Government buildings (federal, municipal, prisons, etc.)
- Tax exempt entities such as K-12 schools, hospitals, places of worship, private schools & universities, not-for-profit owned buildings, Native American Tribal governments
What types of taxpayers can claim 179D?
- Designer, engineer, or an architect of a Federal, State or municipal government building, or tax exempt building. Examples include:
- Architects, Design/Build Contractors, Mechanical Engineers, Electrical Engineers, Building Automation and Building Controls firms
- Commercial building owner
- Commercial tenant who owns depreciating assets such as HVAC or lighting
