A Federal Tax Incentive Generating Additional Deductions up to $5.00 per SF. Our business advisors, rich in experience, assist you in formulating and implementing success-driving strategies.
The Energy Policy Act of 2005 (EPAct) created the §179D Energy Efficient Commercial Building Deduction as a tax incentive to encourage energy efficient design. It applies to both newly constructed and renovated buildings targeting HVAC and lighting systems as well as the building envelope. The §179D Deduction is available to commercial building owners as well as engineers, architects, and other designers of buildings owned by government agencies and other tax-exempt entities.» Learn about the §179D Deduction for 2022 and prior.
● When constructed with prevailing wage and apprenticeship requirements, the §179D Deduction starts at $2.50 per square foot when compared to the ASHRAE Reference Standard 90.1 that was in effect for four years prior to the in-service date of the building. Each additional percentage of energy reduction will increase the deduction by $.10, up to $5.00 per square foot.If prevailing wage requirements are not met, the §179D Deduction is $.50 per square foot. Each additional percentage of energy reduction will increase the deduction by $.02 per square foot, up to $1.00 per square foot.
● If prevailing wage requirements are not met, the §179D Deduction is $.50 per square foot. Each additional percentage of energy reduction will increase the deduction by $.02 per square foot, up to $1.00 per square foot.
• Projects started prior to January 30, 2023, do not need to meet prevailing wage rates to qualify for the $2.50 to $5.00 higher tier of §179D Deductions.
• Projects started prior to January 30, 2023, do not need to meet prevailing wage rates to qualify for the $2.50 to $5.00 higher tier of §179D Deductions.
• Example: If a taxpayer constructed a building in 2008 and took a deduction of $1.80 per square foot, prior rules prevented taking additional §179D Deductions for any subsequent energy efficiency improvements. Beginning in 2023, the Inflation Reduction Act allows for additional §179D Deductions for subsequent energy improvements.
For buildings placed in service in 2023 and after, engineers, architects, and other designers can obtain §179D Deductions from tax-exempt entities, including:
Public Organizations, such as:
• K-12 Schools, higher education, and libraries.
• Municipal buildings (police, fire stations, courthouses, and more).
• Public offices, and parking garages, airport terminals.
Other Tax-Exempt Entities, such as:
• Charitable organizations.
• Religious institutions.
• Private schools and colleges.
• Non-profit hospitals.
• Private museums.
• Tribal governments.
• Any other organization falling under §501(c).
Our team of engineers and tax professionals will perform free assessments to prequalify your project. Our §179D Deduction service includes:
Performing modeling and building inspections
Assisting with amended tax returns or filing a change in method of accounting
Reviewing construction documents
Facilitating project scope interviews with the design team
Preparing certificates of energy efficiencies
Obtaining allocations from government building owners
Coordinating with your tax preparer
Providing complementary audit support
For buildings placed in service from 2006 through 2022, the §179D Deduction allows building owners to claim up to $1.80 per square foot. In the case of a taxable year beginning after 2020, the $1.80 per square foot will be adjusted by inflation ($1.82 for 2021 and $1.88 for 2022).
To qualify, newly constructed or renovated buildings must meet or exceed the ASHRAE standards for HVAC, building envelope and interior lighting. The §179D Deduction is available to commercial building owners as well as engineers, architects, and design contractors of government owned buildings. The building can be newly constructed or retrofitted with system improvements. Parking garages and residential buildings with four or more stories may also be eligible.
• Projects started prior to January 30, 2023, do not need to meet prevailing wage rates to qualify for the $2.50 to $5.00 higher tier of §179D Deductions.
• Any construction or installation started on or after January 30, 2023, must meet prevailing wage rates to qualify for the $2.50 to $5.00 tier of deductions.
• K-12 Schools, higher education, and libraries.
• Municipal buildings (police, fire stations, courthouses, and more).
• Public offices, and parking garages, airport terminals.
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