Join us August 27th for an AIA-accredited live virtual meetup on the 179D and 45L tax incentives.
Register Now%201.svg)
Section 179D offers lucrative tax deductions for businesses investing in energy-efficient improvements. Whether you're renovating your existing structure or constructing a new one, there's a potential to claim up $5+ per square foot. And with TaxTaker by your side, every step is simplified.
.webp)
Enhancements to insulation, roofing, windows, and doors.
Installing LED lighting, smart lighting controls, and daylight sensors.
Opting for high-efficiency heating, ventilation, and cooling systems.
Designers can be allocated the 179D deduction from government and tax-exempt building owners. Designers are defined as anyone who creates technical specifications for the installation of energy efficient property.
Estimate Tax SavingsGovernment Entities: Public K-12 schools, public universities, military and federal entities, airport authorities, county/city/state entities
Tax-Exempt Entities: Universities, charter schools, hospitals, churches, Indian tribal government, Alaska Native Corporation
Designer Examples: Architects, Engineers, Contractors, Environmental Consultants, Energy Service Providers
.webp)
The Section 179D tax deduction is a federal incentive that allows building owners and certain designers to deduct the cost of qualifying energy-efficient improvements made to commercial or government buildings. It offers up to $5.81 per square foot for improvements to HVAC, lighting, or the building envelope that meet required energy savings thresholds.
This deduction is available in all 50 states and has been widely used by building owners, architects, and engineers working on projects ranging from public schools and office buildings to warehouses and multifamily developments. Whether your project is in New York, Texas, California, or anywhere else in the U.S., 179D can offer significant tax savings for energy-efficient construction or retrofits.
In 2025, two main groups may qualify for the 179D deduction: (1) commercial building owners who invest in energy-efficient upgrades, and (2) designers—such as architects, engineers, and contractors—who work on qualifying energy systems in government-owned buildings.
The deduction is available nationwide, and eligibility does not depend on the building’s location but rather on the nature of the project and the improvements installed. Whether you're developing a private warehouse in Arizona or designing a government facility in Illinois, you may be eligible to claim the deduction if the project meets the energy efficiency standards set by the IRS and Department of Energy.
As of 2025, the 179D deduction ranges from $0.58 to $1.16 per square foot without prevailing wage and apprenticeship compliance, and up to $2.69 to $5.81 per square foot if those labor standards are met. The exact amount depends on the level of energy savings achieved compared to ASHRAE benchmarks and whether the project meets labor compliance thresholds outlined in the Inflation Reduction Act.
These rates apply uniformly across all U.S. jurisdictions, offering substantial incentives for commercial energy-efficient upgrades. For example, a 100,000-square-foot facility with qualifying systems could generate between $58,000 and $581,000 in deductions—whether located in Florida, Ohio, Oregon, or anywhere else in the country.
The Inflation Reduction Act (IRA) introduced several significant updates to key tax incentives, including the Investment Tax Credit (ITC), Section 179D for energy-efficient commercial buildings, Section 30C for alternative fuel vehicle refueling property, and Section 45L for residential energy-efficient property.
Prevailing wage and apprenticeship (PWA) requirements are not mandatory to claim the 179D deduction, but they do significantly increase the available benefit. Under the Inflation Reduction Act, projects that meet these labor standards can qualify for the full deduction of up to $5.81 per square foot in 2025.
If these requirements are not met, the deduction is still available, just at a lower rate, ranging from $0.58 to $1.16 per square foot, depending on energy savings achieved. This allows many projects across the U.S. from office retrofits to warehouse builds—to still benefit meaningfully, even without full labor compliance.
Yes. Architects, engineers, and other design professionals who contribute to energy-efficient systems in government-owned buildings (such as schools, courthouses, and municipal facilities) can claim the 179D deduction if they receive a formal allocation letter from the government entity.
This benefit applies nationwide and is particularly valuable for firms that routinely work on public-sector projects. Whether you’re based in Washington state or working on federal projects in Washington, D.C., claiming 179D can help recover costs and improve cash flow—especially for firms participating in state or city green building initiatives.
An allocation letter is a signed document from a government agency that transfers the 179D deduction to the qualifying designer of a public building project. This typically includes architects, engineers, energy consultants, or design-build contractors responsible for the energy systems.
To claim the deduction, the designer must obtain the letter from the government entity that owns the building, confirming their role in designing the qualifying energy-efficient features. This process is standardized across the U.S., whether the project is a public school in Pennsylvania or a state courthouse in Nevada. The letter is a key compliance document and must be retained for IRS documentation.
A 179D study is a technical report that verifies the energy efficiency of a building’s systems to determine eligibility for the deduction. It includes computer-based energy modeling, a site visit to confirm installation, and final certification by a qualified third-party professional (such as a licensed engineer).
The study compares the building’s performance against a baseline standard set by ASHRAE, typically using tools like eQUEST or EnergyPlus. This process is required regardless of the project’s location—whether you're upgrading a hospital in Michigan or constructing a government facility in Utah.
Yes, 179D and Cost Segregation can both be claimed on the same property, as they apply to different parts of the tax code. 179D covers energy-efficient systems like lighting, HVAC, and insulation, while Cost Segregation accelerates depreciation for specific components such as flooring, cabinetry, or specialty electrical systems.
This combination is commonly used nationwide by commercial real estate owners looking to reduce tax liability and improve cash flow. Whether you own a medical office in Arizona or a logistics center in Indiana, these strategies can work together to maximize your benefit—just be sure to coordinate with your tax advisor to avoid overlap in deductions.
Yes, multifamily buildings may qualify for the 179D deduction if they are four stories or more above grade and are considered commercial under the IRS guidelines. These buildings must include eligible energy-saving systems and meet specific energy reduction targets compared to a baseline standard.
Multifamily developers across the U.S.—from high-rise apartments in Chicago to mixed-use buildings in Atlanta—can benefit from 179D, particularly for projects incorporating efficient HVAC, envelope insulation, or LED lighting. Lower-rise residential projects, however, may instead be eligible for the 45L tax credit.
Yes! TaxTaker specializes in helping building owners, designers, and developers claim the 179D deduction. We provide free estimates, manage the entire energy study and allocation process, and work directly with your CPA or tax team to ensure full compliance.
Our team has helped clients across the country—from New York to California—maximize their savings through strategic use of 179D, often in combination with other incentives like the 45L tax credit and cost segregation studies. Whether you're working on a new build or a retrofit, we’ll help you uncover the full value of your energy-efficient upgrades.
Use the following links to learn more about the 179D tax deduction, eligibility requirements, and educational resources tailored for building owners, designers, and non-profits interested in energy-efficient building upgrades. These resources provide up-to-date, authoritative information from government agencies and reliable sources.
.svg)
.svg)
