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How IRA Upgrades Can Effect Tax Returns for Real Estate Property Owners & Developers

A prominent federal tax benefit, the §179D Energy Efficient Commercial Building Tax Deduction, was modified by the Inflation Reduction Act of 2022. It began as the “Build Back Better,” upgrading in the middle of 2022 to become the Inflation Reduction Act of 2022, also known as the IRA.

The act significantly impacted several businesses and was centered on important issues, including environmental justice, decarbonization, and inexpensive and accessible energy. It also included several real estate-related measures directly affecting commercial building owners and developers.

Now that most of the incentives are taking effect for 2023 tax returns, it’s necessary to review the legislation and determine how the real estate industry may take advantage of the IRA and available tax benefits.

Tax Deduction for Energy-Efficient Commercial Buildings

The 179D Tax Deduction may not be brand-new, having been enacted in 2005, but it did get significant revisions as part of the IRA in 2022. Several procedures need to be approved to incentivize the developers and owners of modern, energy-efficient commercial or high-rise residential structures and claim the deduction, such as creating an energy model with certified software and having a licensed third-party professional engineer inspect the site.


Post IRA Update:

Making Energy Efficiency a Priority Pays

Thanks to the 179D deduction, energy efficiency expenses can be written off in full within the first year, instantly improving cash flow for real estate owners and developers. Additionally, non-taxpaying businesses may transfer the deduction to the architect or designer to encourage them to concentrate on energy saving and efficiency in public areas. Consequently, companies can lower their carbon impact and enjoy large tax savings.

At National Tax Group, our team of tax specialists, engineers, and energy modelers is prepared to support you for your 179D deduction claim. Reach out to us today for expert advice and assistance if you want more information about how these changes might affect your deduction amount.