What is the deduction?
The Internal Revenue Code Section 179D deduction allows the owner of a commercial building to receive a tax deduction for a building that is constructed or renovated in an energy-efficient manner.
It provides an immediate first year tax deduction for specific energy-efficient portions of a new or remodeled commercial building. To claim the deduction, these building components must be tested and certified as attaining specific savings compared to a 2001 energy standard.
A maximum deduction is allowed if the overall components attain a 50 percent energy savings compared to the standard, limited to $1.80 per square foot. Partial deductions are allowed for any one of the three systems that reach a required percentage of savings, with the deduction for each system capped at $.60 per square foot. Starting in 2021, the amount will be increased in line with inflation.
Do you qualify?
The deduction is available to the owner or lessee of a commercial building for qualified new construction, renovations, or additions. Single-family homes, multifamily structures under four stories, and mobile or modular homes do not qualify.
The deduction applies to structures built since 2006, including:
- New commercial buildings (office buildings, retail space, restaurants, and manufacturing facilities and warehouses)
- Retrofitted buildings
- Leadership in energy and environmental design (LEED) buildings
Building features that qualify for the deduction include:
- Lighting systems
- Heating, cooling, ventilation, and hot water systems (HVAC)
- Building envelope construction (i.e., insulation, doors, and windows) or retrofitting
Energy efficient commercial building deduction services
The benefits of building green extend beyond the environment. As energy-related tax incentives have grown, CliftonLarsonAllen has become a leader in developing strategies to capitalize on the opportunities they create. We can help maximize your tax deduction, and reduce ongoing energy consumption and costs.
The projected savings must be independently certified by a professional engineer or third-party contractor using qualified software. We will perform the energy modeling and independently certify that the building meets the requirements for energy efficiency. Once the certification is complete, we can help you claim the benefits on your tax return.
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