179D Tax Deduction: Unlock up to $5.81 per Square Foot in Energy Tax Deductions

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179D Tax Deduction: Unlock up to $5.81 per Square Foot in Energy Tax Deductions

What is Section 179D?
Section 179D is a federal tax incentive that rewards commercial building owners and designers for energy-efficient building improvements. It provides substantial tax deductions—up to $5.81 per square foot—for installing qualifying energy-efficient lighting, HVAC, and building envelope systems that reduce energy consumption compared to industry standards. Self storage facilities are great candidates for 179D even if you have already captured some accelerated benefits through Cost Segregation.

Owners can claim significant tax savings up to $5.81 per square foot in immediate tax deductions, potentially saving hundreds of thousands of dollars on larger properties.

The tax deduction significantly improves the return on investment for energy upgrades, often shortening payback periods by years. Newly constructed buildings or recent significant improvements qualify.

Energy-efficient improvements enhance your buildings value by reducing operating costs and increase property marketability, creating both immediate tax benefits and long-term value.

Who is eligible for the deduction? The 179D tax deduction is available to those who own or design energy-efficient commercial buildings. Generally speaking our current construction methods qualify as energy-efficient commercial buildings. The 2022 Inflation Reduction Act expanded eligibility to include tax-exempt organizations who can allocate the deduction to primary designers of qualifying systems. So the law now applies to commercial buildings owners, building designers for government, non-profit, religious, and tribal organizations. These beneficiaries would be architects, engineers, and design-build contractors.
The 179D deduction applies to virtually any commercial building that implements qualifying energy-efficient systems including:

Self Storage
Warehouses
Offices
Retail properties
Manufacturing properties
Government buildings
Religious, tribal and charitable organizations (designers)

The process is very straightforward. An initial assessment is made. CSSI reviews your building specifications and documentation to determine eligibility for deductions of up to $5.81 per square foot for energy-efficient commercial buildings. A licensed engineer conducts a comprehensive on-site inspection to document your building’s energy systems including HVAC, lighting, and building envelope. Using IRS-approved software, our engineers model your building’s energy performance against ASHRAE standards to calculate your eligible deduction amount. CSSI then provides all required certification documentation and works with your tax professional to properly claim the deduction on your tax return.

179D is a powerful tool for accelerating the adoption of renewable energy projects. By reducing costs and improving financial feasibility, these tax incentives support a more sustainable and energy-efficient future. Businesses and investors looking to capitalize on these benefits should stay informed about policy changes and consult with experts to maximize their tax advantages.

If you are looking to utilize green building tax incentives through 179D, contact CSSI to discover how much you could save. Don’t leave money on the table—maximize your tax benefits today

Written by:

Warren Dazzio

Executive Vice President, CSSI

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