The 179D tax deduction offers a federal incentive for owners of commercial buildings to claim a deduction for installing energy-efficient components like lighting, HVAC, Fuel Cell Generators, Battery Storage and building envelopes, incentivizing reduced energy use. Enhanced by the Inflation Reduction Act, it allows for higher deductions (up to $5/sq ft) for projects meeting prevailing wage and apprenticeship (PWA) requirements and can be claimed every three years for upgrades, potentially benefiting designers of tax-exempt buildings too.  

Who Qualifies?

• Building Owners: 
  For new construction or retrofits of commercial buildings and residential rentals 4+ stories. 

• Designers (Architects, Engineers, Contractors): 
  For improvements in government-owned buildings or those owned by tax-exempt entities (like schools, non-profits). 

What's Eligible? 

• Interior Lighting Systems

• HVAC & Hot Water Systems

• Building Envelope: (walls, roofs, windows)

Key Benefits & Updates (Post-2022):

• Higher Deduction Amounts: Up to $5 per square foot for meeting energy savings and PWA standards. 

• Repeated Claims: Can be claimed every three years for substantial building upgrades. 

• Expanded Allocation: Deduction can go to designers for tax-exempt building projects. 

• PWA Requirement: Meeting prevailing wage and apprenticeship rules significantly boosts the deduction. 

How to Claim:

• Meet Energy Standards: Ensure improvements meet ASHRAE/IES energy efficiency benchmarks. 

• Get Certified: Obtain a certification from a qualified professional verifying the energy savings. 

• File: Include the certification with your tax return to claim the deduction. ​​