Energy Efficient Commercial Building Tax Deduction (EECB): 179D Tax Deduction

Overview

Claim Tax Credits up to $5 Per Square Foot for Commercial Buildings

The 179D EECB expands the tax deduction for building owners making upgrades for energy efficiency in buildings. It reduces the efficiency standard threshold, which helps more buildings meet the higher ASHRAE standards. It also provides for expanded allocation of the deduction to tax-exempt entities and enhances access to the deduction for retrofit projects.

Status

Available now

Qualified improvements

This tax code allows commercial building owners to claim tax deductions for qualifying upgrades that improve energy efficiency. The deductions must be for one of three systems: HVAC, interior lighting, and/or building envelopes. The contractor must reduce the total annual energy cost by 25%; partial deductions are allowed.

Tenants may be eligible if they make construction expenditures. If the system or building is installed on federal, state, or local government property, the 179D tax deduction may be taken by the person primarily responsible for the system's design. The 179D tax deduction does not apply to other non-tax-paying entities, including but not limited to NGOs or churches, unless there is an Energy as a Service (EAAS) agreement that is owned by a tax-paying company.

Potential rebates

The 179D tax deduction has been in effect since January 1, 2006, and is now a permanent program enacted as part of the Consolidated Appropriations Act, 2021, signed into law on December 27, 2020. The base deduction is for $0.50 per square foot with scaled increases for additional efficiency up to $1.00 per square foot. There are bonus deductions available of $2.50 per square foot (if prevailing wage and apprenticeship requirements are met) up to $5.00 per square foot. table

The exact amount of the deduction depends on the total energy and power-cost savings from energy-efficiency improvements.

Energy-Efficiency Criteria for Certified Residential Cold Climate Heat Pumps

Reduction in total annual energy and power costs or EUI	Without prevailing wage	With prevailing wage
25% minimum	$0.50/SF	$2,500
+1%	$0.02/SF	$0.10/SF
50% maximum	$1.00/SF	$5.00/SF

Learn more

Disclaimer: The advice offered here is intended as a basic guide only and not to be used as, or substituted for, professional tax preparation advice. We strongly advise you seek professional support for assistance and advise you to consult with a certified tax preparation specialist or CPA as appropriate.

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