SECTION 179D

As a commercial property owner or lessee, energy efficient improvements you make may qualify for deductions under the Energy Policy Act of 2005. Your changes to improve the building envelope, interior lighting, cooling, heating or ventilation systems, and even hot water handling may qualify you for savings. Our study utilizes required software and analysis to qualify your claim.

Eligibility

Section 179D provides tax credits of up to $1.80 per square foot for commercial and industrial buildings as well as some residential buildings above four stories. The greater the energy savings, the greater the deduction up to the defined limits. The deduction can be taken by the building owner or allocated to designers and contractors in some instances.

Section 179D is fairly complex but to encourage you to consider whether or not this often over-looked incentive might be available for your projects, here are some very basic guidelines:

  • The credit can be energy efficiency improvements in three areas: the building envelope, HVAC and lighting.
  • Each area may be eligible for up to $.60/square ft in deduction for a total of $1.80/square ft overall.
  • Cost savings must be demonstrated at 25% for lighting, 15% for HVAC and 10% for the building envelope.
  • The deduction can only be allocated to contractors and designers for government owned buildings. Owners of other types of buildings are eligible but the deduction cannot be allocated in those cases.
  • An individual taxpayer cannot prepare the claim on their own. A licensed engineer must complete a certification to validate the savings claimed on behalf of the owner.

Types of buildings that may be eligible:

PUBLIC

  • Public schools
  • Federal, state, county and local government facilities
  • Municipalities
  • Military sites

PRIVATE

  • Commercial
  • Office
  • Warehouse
  • Manufacturing
  • Retail
  • Residential (4+ stories, leased residences)

FAQ

Are energy efficient improvements eligible for tax credits on commercial properties.

In general, the answer is yes. It is best to review your options and tax incentive opportunities under Section 179D of the tax code before beginning work, but deductions can be claimed once the work is completed. Physical changes related to lighting, HVAC, plumbing, even water heaters may be eligible for property owners or lessees.