Getting to Know the 179D Energy Efficient Tax Deduction

Reduce energy consumption, increase tax deductions

Going green and transitioning into using eco-friendly materials in buildings has become increasingly popular as it benefits the environment, while also lowering electricity bills. The 179D Energy Efficient Tax Deduction is a significant tax break that rewards the energy efficiency of a building with cost-effective deductions on tax returns. Buildings that have been designed, constructed, or renovated to include energy-saving systems that reduce the total energy consumption by 50% can qualify for the deduction.

Many different individuals can take advantage of the deduction, including commercial building owners and contractors, hotel owners, and architects and designers. A lot of elements that already exist inside of a building can qualify for this deduction.  

FAQ’s Regarding the 179D Energy Efficient Tax Deduction:

Q. How much money can be obtained through the deduction?

Earn up to $1.80 per square foot on each qualifying property, and save $.60 on each energy saving system.

Q. What are examples of qualifying energy saving systems? 

Qualifying energy saving systems include hot water systems, building envelope systems, HVAC systems, and interior lighting systems.

Q. Can I apply for the 179D deduction on the same building more than once? 

Yes, you can apply for the 179D tax deduction for the same building multiple times, but the amounts awarded cannot exceed $1.80 per sq./ft. overtime.

Q. What types of buildings can qualify? 

Commercial buildings of any type, including office buildings, industrial buildings, warehouses, retail spaces, multi-family homes, and apartment buildings. Parking garages, government-owned buildings, and hotels can also qualify.

Q. What exactly are ‘power costs’? 

Power costs are the highest monthly demand charges and associated taxes and fees related to the electricity spent.

Q. Does the tax deduction apply to both newly constructed and existing buildings? 

Yes. Any building that has been built or renovated to incorporate energy saving systems in order to reduce the building’s energy consumption can qualify.

Q. Can I qualify for 179D if I’ve purchased an energy efficient building?

No, simply purchasing an already existing energy-efficient building will not qualify for the deduction. In order to utilize it, the energy saving systems must have been installed as part of a plan designed to reduce total energy and power costs.


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