What Business Owners Should Know About the 179d Tax Deduction
Business owners are often surprised to learn just how many tax incentives are available to offset the cost of energy efficiency upgrades. One of the most impactful programs over the past two decades has been the 179d Energy Efficient Commercial Buildings Tax Deduction, or the 179d tax credit for short.
Learn more about 179 credits, determine whether your business qualifies, and find ways to maximize the credit on your taxes.
What Is the 179d Tax Deduction?
The Energy Efficient Commercial Tax Deduction is a federal incentive for businesses investing in energy improvements. The 179d energy credit was introduced as a part of the Energy Policy Act of 2005 and was first available in 2006. The credits incentive commercial buildings to make energy investments across several areas, including:
Building envelope, including insulation
HVAC
Interior lighting
Mechanical systems
Read more: How to Increase the Value of Commercial Properties
Who’s Is Eligible for the EECBD?
The Inflation Reduction Act included several changes that expanded both the dollar amount of the credits and the businesses that qualify. As of the IRA’s official start state of January 1, 2023, businesses applying for the EECBD must:
Be owners of a qualified commercial building.
Designers of EECBD projects are installed in businesses owned by tax-exempt entities, including government entities, Indian tribal governments, and certain other tax-exempt organizations.
Qualifying buildings must also meet certain criteria. They must be located in the US and invest in interior lighting, HVAC and hot water systems, or the building envelope. As part of the comprehensive plan, the project must deliver 25% energy savings.
Not sure if your building qualifies? Your Keen energy consultant will ensure your facility meets all relevant requirements and explain where to report the 179d deduction on your tax returns.
IRA Increases Deduction Amounts
The Inflation Reduction Act greatly increased the potential credits offered by the 179d deduction. Initially, the credit was capped at $1.80 per square foot. The IRA increased the cap to $5.65 per square foot and introduced partial deductions for small facilities that may not meet full eligibility requirements. These partial deductions include:
15% savings on HVAC systems
25% savings for lighting systems
10% savings for building envelope systems
For two decades, the 179d Energy Efficiency Tax Deduction has been a key component in lowering commercial and industrial energy consumption, and the IRA’s changes make it even more valuable.
Maximize Commercial Energy Efficiency Tax Credits with Keen
Keen Technical Solutions is your committed energy efficiency partner. We work with clients from contact to completion, streamlining the process and delivering superior, cost-effective results. Our experienced team will audit your facility’s energy environment, identify energy-saving opportunities, and help you access any relevant tax incentives.
See what Keen can do for you; contact an energy consultant today.