Section 179D Tax Deduction

Section 179D Energy Efficient Tax Deduction 

The Section 179D tax deduction is a compelling federal tax incentive available to Texas companies designing and constructing energy-efficient systems in commercial buildings. Specifically, Section 179D considers work performed on interior lighting systems, heating, cooling, ventilation (HVAC) and hot water systems, and building envelope systems.  A tax deduction of up to $1.80 per square foot is available for the installation of these systems that result in 50% or greater energy savings as compared to a baseline standard. There is the eligibility to claim a $0.60 per square foot deduction for upgrades that result in a lower percentage of energy savings. For properties completed after 2020, inflation adjustments are made which increases the value of this powerful incentive.  Thanks to the Consolidation Appropriations Act passed in 2020, the Section 179D legislation has been made permanent.

Qualifying Projects

New construction, renovations, and additions to commercial or high-rise residential buildings most often qualify. Either at the time of construction or as part of an upgrade process, energy-efficient building systems must be installed that reduce the property’s energy profile as compared to a baseline standard. The energy reduction requirement varies based on the energy-efficient system that was installed as a part of the project. The baseline standard (ASHRAE 90.1) by which the energy savings are measured changes depending on the year the project was completed.

Who Qualifies?

Many companies can qualify to claim the Section 179D deduction. In addition to commercial building owners, other companies such as architects, engineers, general contractors, construction managers, energy service providers, and specialty contractors (mechanical, electrical, glazing, etc.) may qualify for their work on government-owned buildings. In other words, the powerful savings potential is also available to those involved in the design and construction industry.

Claiming the Deduction

Our firm has significant experience working with Texas companies across several industries to claim this lucrative tax savings opportunity. Calvetti Ferguson team members have the engineering and accounting expertise to conduct the required quantitative and qualitative assessments, provide certifications, and prepare the necessary documents for submission to the IRS. The result is a turnkey process that can result in significant federal tax savings.

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Calvetti Ferguson works with mid-market companies, private equity firms, and high net worth individuals across the country. Regardless of the complexity of the compliance, assurance, advisory or accounting need, our team stands ready to assist you. Please complete the form below, and we will follow up with you shortly.