Section 179D Tax Deduction

Commercial energy audits

An overview of the
Section 179d TaX Deduction

To take advantage of the Section 179D Tax Deduction all you need to do is reduce your energy use.  Sounds simple enough.  All you need to know is how much.

Section 179D Tax Deductions apply to energy efficiency improvements to a commercial building.   So, what you can improve are:

  • Interior lighting systems
  • Building envelope construction
  • Heating, cooling, ventilation, and hot water systems.

Above all, these improvements should reduce the building’s total energy and power cost by a minimum of 50%.  This is in comparison to a building meeting the minimum requirements set by standards established by ASHRAE.  ASHRAE is the American Society of Heating, Refrigerating, and Air Conditioning Engineers. 

How This Works

In a nutshell, it’s available to all commercial building owners and tenants who reduce their building’s energy use.  As a result, when you lower your operating costs by reducing your energy use, you increase your profits dollar for dollar.  You can take a tax deduction worth up to $1.80 per square foot if you do so.

Consequently, when you reduce your building’s energy use, you increase the energy savings.  In addition, these savings must total a minimum of 50 percent reduction over the current ASHRAE 90.1 standard.

Section 179D Tax Deduction
Section 179D Tax Deduction
Special Rule for “Designers” of Government Buildings

A special rule allows a governmental entity to assign the deduction to the person primarily responsible for designing the building, such as architects or engineers. Similarly, the deduction may be assigned to contractors for designing and choosing efficiency upgrades, such as lighting and HVAC systems. 

Thus, if you are involved in the design of a community center, public educational facility, municipal parking garage, or other government building, you may qualify for the deduction.

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