179D Has Permanently Been Extended; What Does This Mean for Taxpayers?

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Green construction and the implementation of energy-efficient structures and systems in both federal and privately-owned buildings has seen massive increases over the years. The government has been encouraging this eco-friendly shift with incentives for commercial buildings that go green. In 2005, the Energy-Efficient Commercial Buildings Deduction (179D) was created to promote taxpayers to build, renovate and design with energy conservation in mind.

This deduction, which was set to expire on December 31, 2020, has now become a permanent tax benefit to help gear the country toward more sustainable construction.

Revisions To The Bill

In the past, the 179D tax deduction has been a year to year extension that congressional administrations had to pass in order for builders to claim its benefits. Fortunately, Congress recently enacted a spending package that made 179D permanent. Now builders and companies can count on these deductions every year and make future construction decisions based on this permanent tax benefit.

The permanent extension of this bill will cause a few minor changes, however. For example, to account for inflation, deductions will increase annually starting this year. Energy efficiency criteria will also be more stringent and will have updated reference models to compare buildings to.

The Basics Of The 179D Deduction

How exactly does 179D help commercial properties and the people who design them? The 179D deduction gives taxpayers a direct deduction of $1.80 per square foot for designated energy-efficient square footage. For example, if a building has 200,000 square feet of qualified energy-efficient design or construction, the building may be eligible for $360,000 in tax deductions.

Properties of a building that would qualify include building envelope, interior lighting, and HVAC and hot water systems. In order to qualify, however, these elements needed to be built or in service from 2006 or later years.

Who Can Take Advantage of 179D?

Depending on who owns the building and what work has been done to it, the deductions that apply will differ.

Government, State & Local Buildings

When it comes to state, local and government-owned buildings, deductions are available to the engineers, contractors and architects who helped design, build or renovate the technical specifics of the property. In some cases, more than one person may be eligible for these tax benefits.

Repairing, installing or maintaining a property does not qualify a worker for these benefits, however.

Privately- Owned Buildings

As long as the building was placed in service starting January 1st, 2006, it may be eligible for 179d tax deductions. The owner of the property as well as the tenants can be considered for these benefits.

How Can You Claim 179D?

Claiming these benefits is a detailed process that requires specific steps. Gathering the property’s total energy savings as well as having a formal inspection by a licensed engineer or contractor is required to complete a successful claim. Our team at National Tax Group can work directly with you to make sure the process is easy and efficient every step of the way. Call us at  561-257-3436 to set up your initial assessment of your benefits.

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