The 179D commercial buildings energy efficiency tax deduction primarily enables building owners to claim a tax deduction for installing qualifying systems and buildings. 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 exists an energy-as-a-service agreement that is owned by a tax paying company. Please see IRS Notice 2008-40 or FAQs for additional information. 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 of 2021 signed into law on December 27, 2020.

The following information is still applicable for properties placed into service on or before December 31, 2020. Updated information will be made available for properties placed into service on or after January 1, 2021, upon anticipated IRS Notice release.

A tax deduction of $1.80 per square foot is available to owners of new or existing buildings who install (1) interior lighting; (2) a building envelope; or (3) heating, cooling, ventilation, or hot water systems that reduce the energy and power cost of the interior lighting, HVAC, and service hot water systems by 50% or more in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1. Cost savings must be calculated using qualified computer software, which we link to below.

For properties placed into service on or before December 31, 2020, the energy and power cost shall be compared with the minimum requirements of ASHRAE Standard 90.1-2007. Projects placed into service on or after January 1, 2021, shall use the most recent Standard 90.1 affirmed no later than the date that is 2 years before the date that construction of the qualifying property begins, or the date the construction permit of the qualifying property is issued. Details and associated updates to this webpage are awaiting an anticipated IRS Notice.

Deductions up to $0.60 per square foot are available to owners of buildings in which individual lighting, building envelope, or heating and cooling systems partially qualify by meeting certain target levels or through the interim lighting rule. For properties placed into service on or before December 31, 2020, following IRS Notice 2012-26, choose the appropriate compliance pathway shown in the table below. Updates for properties placed into service on or after January 1, 2021, will be made available upon anticipated IRS Notice release.