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.
Significant Tax Savings
Claim up to $5.81 per square foot in immediate tax deductions, potentially saving hundreds of thousands of dollars on larger properties.
Accelerate ROI on Improvements
The tax deduction significantly improves the return on investment for energy upgrades, often shortening payback periods by years.
Enhanced Building Value
Energy-efficient improvements reduce operating costs and increase property marketability, creating both immediate tax benefits and long-term value.
179D Service
Who Can Claim the Deduction?
Eligibility
The 179D tax deduction is available to those who own or design energy-efficient commercial buildings. The 2022 Inflation Reduction Act expanded eligibility to include tax-exempt organizations who can allocate the deduction to the primary designers of qualifying systems
Commercial Building Owners
Property owners who implement qualifying energy-efficient systems in their buildings.
Tax-Exempt Building Owners
Government, non-profit, religious, and tribal organizations can allocate deductions to their building designers.
Architects & Engineers
Designers of energy-efficient systems for government, non-profit, religious, or tribal buildings can receive allocated deductions.
Design-Build Contractors
Companies that both design and construct energy-efficient building systems for qualifying tax-exempt entities
Industries That Can Benefit from the 179D Tax Deduction
The 179D deduction applies to virtually any commercial building that implements qualifying energy-efficient systems, including:
Multi-Family Development (4+ Stories)
Government (Designers)
Religious, Charitable, and Tribal Organizations(Designers)
Warehouses
Office
Retail Properties
Manufacturing Properties
The 179D Process
Discover tax-saving opportunities with our streamlined process:
Initial Assessment
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.
Professional Site Visit
A CSSI licensed engineer conducts a comprehensive on-site inspection to document your building’s energy systems including HVAC, lighting, and building envelope.
Energy Modeling
Using IRS-approved software, our engineers model your building’s energy performance against ASHRAE standards to calculate your eligible deduction amount.
Certification & Filing
CSSI provides all required certification documentation and works with your tax professional to properly claim the deduction on your tax return
Start Reducing Your Tax Burden Now
Discover the hidden tax benefits for your property or business with our no-cost preliminary analysis. Our experts will evaluate your eligibility and estimate your potential savings with no obligation.
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Olena M.
Property Owner
Amazing service and super quick turnaround. We reached out to CSSI to perform a cost seg studies for our 3 multifamily properties. Received a call back within 10 minutes and initial estimate of high and low range of additional depreciation expenses within 48 hours. We also got a quote from other 3 local companies and not a single one came even close in terms of pricing, turnaround time or detailed outcome. One firm sent me 30 pages questionnaire and requested one million reports to even give me a quote and demanded a non-refundable deposit. We were able the schedule the inspection within days and my reports came in within 2 weeks just as promised. Thank you, Aaron, and CSSI Services.
5
Daan D.
Property Owner
Incredible experience working with our CSSI rep. He is very knowledgeable and communicative. He saved us a tremendous amount of money and I highly recommend him and his firm.
5
David D.
Property Owner
Great experience working with CSSI on my accounting services. Very professional service.
5
Jamie W.
Property and Business Owner
Very happy with the study that CSSI was able to get done for me and would recommend them.
5
John L.
Retail Property Owner
Recently used CSSI for two retail properties of mine. The cost seg studies turned out better than expected. I am a very happy client and will be using them on future studies.
5
Michael C.
Property and Business Owner
Enjoyed working with CSSI. Their expertise in cost segregation really helped us. The team is incredibly knowledgeable, professional, and always willing to go the extra mile to ensure we understand every step of the process. From start to finish, the service was seamless and exceeded our expectations.
5 Frequently Asked Questions
What is the 179D tax deduction?
The 179D tax deduction is an incentive for designing energy-efficient commercial buildings. Building owners can claim a tax deduction for installing qualifying energy-efficient systems.
What types of buildings qualify for the 179D deduction?
Qualifying buildings include commercial buildings and multi-family residential buildings four stories or higher. This includes offices, retail spaces, industrial buildings, warehouses, and apartment complexes.
What energy systems can qualify for the 179D deduction?
The deduction applies to three types of systems:
- Interior lighting
- Building envelope (roof, walls, windows, doors)
- Heating, cooling, ventilation, and hot water systems
How much is the 179D deduction worth?
The deduction can be up to $5.81 per square foot for buildings that achieve a 50% reduction in energy costs compared to a reference building. Partial deductions of $0.60 per square foot are available for each qualifying system.
Who can claim the 179D deduction?
Who can claim the 179d deduction?
The deduction can be claimed by building owners, tenants, or designers of government-owned buildings.
Can the 179D deduction be claimed for retrofits or renovations?
Can the 179d deduction be claimed for retrofits or renovations?
Yes, the deduction can be claimed for both new construction and renovations of existing buildings.
What documentation is needed to claim the 179D deduction?
What documentation is needed to claim the 179D deduction?
You’ll need certification from a qualified individual (like a licensed engineer or contractor) that the required energy savings have been achieved. This typically involves energy modeling software to demonstrate the energy cost reductions.
How long has the 179D deduction been available?
How long has the 179d deduction been available?
The 179D deduction was first enacted in 2005 and has been extended and modified several times. It was made permanent in 2020 and expanded in 2022 under the Inflation Reduction Act.
Does 179d deduction reduce basis
Yes, the 179D deduction does reduce the basis of the property. When a commercial building owner claims the 179D energy efficiency deduction, the amount deducted is subtracted from the depreciable basis of the building. This means the cost basis used for calculating depreciation in future years will be adjusted downward by the amount of the 179D deduction claimed.
For example, if you install qualifying energy-efficient systems like HVAC, lighting, or building envelope upgrades and claim a $100,000 deduction under Section 179D, your building’s depreciable basis is reduced by that same amount. This adjustment helps prevent double-dipping on tax benefits while still offering a valuable incentive to invest in energy-efficient improvements.
CSSI helps building owners navigate both cost segregation and 179D opportunities. With a strategic approach, you can maximize tax savings while maintaining compliance with IRS requirements. When managed properly, even with the basis reduction, the 179D deduction can lead to significant upfront tax benefits that outweigh the adjustment.
How does 179d deduction work
The 179D deduction is a federal tax incentive designed to encourage energy efficiency in commercial buildings. It allows building owners or designers of government buildings to claim a tax deduction of up to $5.00 per square foot for qualifying improvements to lighting, HVAC, or building envelope systems. To qualify, the property must meet specific energy reduction standards as defined by IRS guidelines.
The process begins with a certified engineering analysis of the building’s energy systems. If the improvements meet or exceed the required efficiency levels, the property owner can claim the deduction for the tax year the project was placed in service. This deduction directly reduces taxable income and improves cash flow.
CSSI helps property owners and designers determine 179D eligibility, conduct the required third-party certification, and file the proper documentation. When combined with a cost segregation study, 179D can create even greater tax savings by accelerating depreciation and reducing overall tax burden.
