Significant increase of the Energy Efficiency Tax Incentives (section 179D)

For those who are unfamiliar, Section 179D is an IRS business tax deduction that enables businesses to write off the whole cost of new or used commercial equipment and buildings.

Maximum Deduction Increase to $5 Per Square Foot

The 179D tax deduction has been significantly increased from the current maximum of $1.88 per square foot in 2022 to $5 per square foot to reward with more than 150% of tax deductions the construction of energy efficient commercial buildings and multifamily buildings that are 4 stories or taller. In addition to energy efficient ground up construction, energy efficient retrofits of older buildings will also be eligible.

Additionally, tax-exempt building owners (such as non-profits) will gain the ability to allocate 179D tax deductions to architects, engineers, and designers responsible for designing a building’s energy efficient systems.

With this legislation, Congress has made it clear that they intend to combat climate change by significantly expanding energy efficiency tax incentives across the board and making more parties eligible to partake in these incentives than ever before.