The 179D Tax Deduction (also known as the Energy-Efficient Commercial Buildings Tax Deduction) allows owners and developers of commercial and multifamily facilities to claim accelerated depreciation for newly constructed or renovated properties.
New program guidelines were enacted, effective January 1, 2023, which allow deductions of up to $5.00 per square foot of commercial properties.
FAQ's About the 179D Tax Deduction
How much CAN I CLAIM IN DEDUCTIONS?
The total deduction varies based on the project's energy savings compared to the applicable energy code.
Depreciation values vary from $0.50/sf up to $5.00/sf if documentable prevailing wages are used.
What type of properties qualify?
Commercial buildings have historically been eligible for 179D accelerated depreciation.
Starting in 2023, high-rise multifamily properties (4 stories or greater) are also eligible for 179D accelerated depreciation.
What qualifies as prevailing wage rates?
These guidelines are currently under development, and the IRS has not clarified exactly what is required and how it should be documented.
The current guidance states that the property owner needs to have documentation that prevailing labor wage rates have been paid on the project.
What is my building Compared to?
179D deduction amounts are currently based on energy savings relative to ASHRAE 90.1 2007.
To calculate the resulting energy savings, Asset Environments creates a 3-D energy model of your building to simulate performance using ASHRAE 90.1 Appendix G.
When can I collect the 179D Deduction?
The 179D deduction can be claimed during the year in which the property was completed, generally when the certificate of occupancy is issued. Unused deductions can be rolled forward into future tax years.