What is the EPAct 179D Tax Deduction?

The 179D Deduction, established in 2005 by the Energy Policy Act, incentivizes energy-efficient commercial building designs through tax deductions.

The program encourages reduced energy-efficient building components specifically:

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HVAC system

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Interior building lighting

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Building envelope for newly constructed buildings or renovations

Who can qualify for a 179D Tax Deduction?

  1. Designers of tax-exempt buildings: HVAC Designers, Architects, Mechanical Engineers, and Electrical Engineers.
  2. Tax-paying, Commercial Building Owners: Owners benefit from accelerated depreciation. Non-tax-paying entities like municipalities, military facilities, and schools can allocate deductions to tax-paying designers.

What did the Inflation Reduction Act Change?

Before 2023, Architects, Engineers, and Design-Build Contractors could receive allocations on federal, state, and local government projects. Starting in 2023, they can also benefit from designs for tax-exempt entities.

The Inflation Reduction Act significantly expanded the program's benefits, increasing deductions to $5.00 per square foot.

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