The 179D tax credit is a valuable federal incentive for developers, builders, and contractors working on energy-efficient commercial building projects. It allows eligible parties to claim a tax deduction for installing specific systems and components, significantly reducing a building’s energy consumption.
What is the 179D Deduction?
The section 179D tax credit applies to both new construction and qualifying retrofits. It can cover upgrades in three key areas:
- Interior lighting systems
- Heating, ventilation, and air conditioning (HVAC)
- Building envelope components, such as insulation, doors, windows, and roofing
The deduction is based on a building’s square footage and energy savings compared to industry standards. This means larger projects with higher efficiency levels can result in substantial tax savings.
Who Can Claim the Deduction?
Building owners are the primary beneficiaries, but designers, architects, engineers, and contractors involved in government-owned projects may also be eligible under certain circumstances. This is because government entities can allocate the deduction to the party responsible for the design work.
For private sector projects, the building owner typically claims the deduction if the energy savings threshold is met. This can be determined through specific testing and certification requirements outlined by the IRS.
Why It Matters for the Construction Industry
The 179D deduction not only encourages sustainable construction but also improves developers’ and owners’ return on investment. Offsetting part of the cost of high-performance systems and materials makes energy efficiency a financially attractive choice.
Over time, these improvements can also lower utility expenses and increase a building’s value, creating long-term benefits beyond the immediate tax deduction.
Prince CPA Group’s Role in 179D Claims
Prince CPA Group specializes in section 179D tax credit and helps clients navigate the process from eligibility review to proper documentation and compliance.
With over 75 years of combined CPA expertise, our leadership team, including Frank R. Prince, CPA, and Ronald J. Yelland, CPA, understands both the technical requirements and the strategic opportunities this deduction provides. We work with builders, developers, and contractors nationwide to ensure eligible projects are documented correctly and deductions are maximized.
Taking the Next Step
If you’ve recently completed or are planning an energy-efficient commercial building project, it’s worth determining whether it qualifies for the 179D deduction. The process involves technical evaluation, documentation, and compliance with IRS guidelines, but the potential tax savings can be significant.
Contact us to learn how Prince CPA Group can help you take full advantage of the 179D deduction and other incentives designed for the construction and development industry.