What is the 179D Tax Deduction?

Section 179D is a deduction that allows building owners to claim up to a $1.80 per square feet for energy-efficient buildings or installing systems to that effect. To qualify, newly constructed or renovated buildings must meet or exceed some key energy reduction requirements and ASHRAE standards. Section 179D is meant to stimulate the economy by rewarding architecture, engineering, and contracting businesses for their work on government-owned buildings.
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What are the Benefits of the 179D Tax Deduction?

You can claim up to $1.80 per square foot of the building worked on. For example, if the qualified building is $100,000 square feet, that could mean up to a $180,000 tax deduction for the work completed.

Who Can Claim It?

Architects, engineers, and contractors that work on new or renovated government-owned buildings and structures, for example:

K-12 Schools

Military Bases

Prisons

Courthouses

Universities

Libraries

City Parks

Airport

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The Consolidated Appropriations Act of 2021 made the Section 179D Energy Efficient Building Deduction permanent and gives business owners and government contractors a tax incentive for energy-efficient improvements to commercial and government buildings.
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What Improvements are Eligible for this Tax Deduction?

Taxpayers who invest in constructing new buildings or improving their existing buildings are eligible for 179D deduction. These investments must be aimed at reducing energy use. The improvements eligible under ASHRAE standards include:

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Here Are Some Case Studies:

The following are examples from a range of industries:

Total Deduction

$13 MM

Project Types Include: K-12 Schools, City Housing, Higher Education, Libraries, Police Stations

Total Deduction

$6 MM

Project Types Include: Nursing Schools, Higher Education, K-12 Schools, Hospitals, College Dormitories

Total Deduction

$2.8 MM

Project Types Include: Fire Stations, Police Stations, K-12 Schools

The 179D Study Process

To qualify for the 179D tax deduction, one needs to follow due process. Broadly there are two parts to the 179D study process.

1. DISCOVERY & ASSESSMENT

Project List – Identify Buildings Secure Allocation Letter(s) Obtain Documentation

2. QUALITATIVE & QUANTITATIVE ANALYSIS

Energy Modeling, Field Inspection, Certification, and Deliver Final Deduction Numbers for Filing

3. REPORTING

Document Cataloguing, Summary Drafting, and Final Report

How Can We Help? The National Tax Incentives Advantage

Case Studies

Hear From 179D Businesses

Our specialty consulting team did an excellent job leading our study and made it as painless and simple for us as possible. It was not too time insensitive, and the benefits were well worth our while”

MECHANICAL CONTRACTOR

We are very appreciative of the worthwhile tax savings we were able to get from this deduction. They’re currently being reinvested into the business as a beneficial cash injection towards our growth goals.”

CONSTRUCTION MANAGER

Frequently Asked Questions

What type of buildings can qualify?

Commercial buildings of any type, apartment buildings of 4 Stories or more, government-owned buildings, and parking garages

What type of projects can qualify?

The section 179D tax incentive was developed with a technology-neutral DOE-approved approach. In general, new construction as well as retrofits with improvements made in a building’s lighting, HVAC, or envelope systems which reduce energy consumption and can be properly modeled by one of the DOE-approved software, can qualify. These include energy management systems, VFDs,  heat recovery, motion sensors, and many others.

How long does it take?

A typical time frame for a full 179D Study is 4-6 weeks. Projects with full sets of design documents and immediate access for inspections will often result in shorter turn around times. For projects with shorter deadlines, pleasefor an assessment.

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