Section 179D of the Federal Tax Code Offers a Tax Deduction for Installing Energy Efficiencies in Real Property
Note: As part of a COVID-19 relief package passed by Congress on December 21, 2020, the §179D deduction will now be a permanent part of the tax code.
Through §179D of the tax code, commercial building owners may be eligible for a federal tax deduction of up to $1.80 per square foot for improving the energy efficiency of new and existing buildings. Specifically, the §179D deduction is worth up to $0.60 per square foot each for qualifying energy-efficient improvements to a building’s lighting system, HVAC system, and the building envelope. After 2020, these amounts will be indexed for inflation. In addition to building owners, primary designers—including architects, engineers, green building consultants, and contractors—of qualifying energy efficiency measures in government-owned buildings may also claim the deduction.
Third-party certification is required to claim the §179D deduction, and Capital Review Group is a leading third-party certifier. Our experience has helped us simplify the certification process and allows us to offer the most competitive fees in this professional specialty.
Energy efficiency projects can generally deliver a positive return on investment when tax incentives are applied. However, capturing all beneficial incentives requires that both engineering and tax strategy are performed in sync. This is where CRG adds exceptional value for our clients. Drawing on our team’s extensive knowledge of engineering and tax law, our §179D certifications provide assurance that your energy efficiency project will yield both maximum technical performance and financial value.
How to Claim the 179D Deduction
When performing a no-cost benefit analysis for the §179D deduction, CRG requests information such as the following:
- Name of legal owner
- Project name and address
- Energy systems to be studied (lighting, HVAC, envelope, or whole building)
- Building usage
- Total square footage of space of the energy efficiencies
- Placed in service date
- Project cost
Benefit Illustration for Building Owner
Based on the energy efficiency attained and application of Revenue Procedure 2011-14, an auto dealer was allowed to claim the full §179D deduction, amounting to $1.80 per s/f—totaling $516,600 with no need to amend tax returns.
Benefit Illustration for Architect
Based on the square footage of the multiple government buildings worked on as well as the sustainable design implemented, an architecture firm was ultimately entitled to deductions nearing $7,000,000 over a 5-year span.