Section 179D energy-efficient commercial building deductions remain one of the most underutilized tax incentives—especially by those who stand to benefit the most.
Unlocking Missed Tax Savings with Section 179D
Section 179D provides a valuable opportunity for building owners, architects, and engineers to receive tax deductions for installing energy-efficient systems. Despite this, many qualifying organizations, particularly those working with non-taxable entities like schools and government agencies, either misunderstand their eligibility or are unaware the incentive even exists.
What Is Section 179D and How Does it Work?
Section 179D is a federal tax incentive that allows building owners to claim a deduction for installing energy-efficient systems, including:
- HVAC and hot water systems
- Interior lighting
- Building envelope improvements
This deduction applies to both new construction and renovations, and it covers commercial, industrial, and multifamily residential properties that are four stories or taller.
Architects and engineers who design energy-efficient systems for tax-exempt entities (such as schools or government buildings) can also be allocated the deduction.
To qualify for the maximum deduction of $5.81 per square foot, projects must meet prevailing wage and apprenticeship requirements. Otherwise, the base deduction reverts to $1.16 per square foot for systems placed in service in 2025.
Section 179D, though valuable, is significantly underclaimed. According to recent estimates prepared for the House Committee on Ways and Means and Senate Committee on Finance:
- Section 179D is expected to result in less than $250 million in total revenue loss over five years (2024–2028).
- At a 21% corporate tax rate, that translates to only $1.19 billion in total deductions claimed over five years.
- With billions of square feet of commercial and public building space across the U.S., this suggests the deduction is drastically underutilized
If you’re a building owner, architect, or engineer, you’re likely foregoing potential funds. The Section 179D deduction can provide up to $5.81 per square foot for qualifying energy-efficient improvements. That adds up fast, especially on large projects.
Our Process at Calvetti Ferguson
At Calvetti Ferguson, we help clients claim the Section 179D deduction by managing the entire process from start to finish. Working with our team provides several advantages, including:
- Evaluate Project Eligibility: Analyze project files and construction documentation to identify qualifying energy-efficient improvements and potential retroactive deductions from past projects.
- Secure Necessary Documentation: Obtain allocation letters from non-taxable entities (if applicable) and ensure a fully IRS-compliant study.
- Conduct Technical Assessments: Perform required site visits by a Qualified Individual and develop an energy model comparison against ASHRAE 90.1 standards, leveraging a Qualified Individual for modeling and inspection.
- Prepare and Certify Documentation: Certify the improvements and prepare all IRS-compliant documentation.
- Claim the Deduction: Complete and file Form 7205.
- Navigate Compliance and Maximize Benefits: Navigate the technical and administrative hurdles of 179D to reduce tax liabilities, increase cash flow, and align your tax strategy with long-term energy and construction goals. Section 179D is not just a deduction—it’s a powerful tool for improving ROI on energy-efficient building investments.
Whether you’re an architect designing schools, an engineer retrofitting city buildings, or a building owner installing high-efficiency lighting, this is a benefit worth exploring. Don’t leave money on the table. Contact Calvetti Ferguson to see how much you’re eligible to claim.
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