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Energy Efficient Commercial Building Deduction (Section 179D)

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What It Is

The Energy Efficient Commercial Building Deduction, contained in section 179D of the tax code, allows building owners to claim a tax deduction for energy efficient property installed on commercial buildings. Eligible property includes interior lighting systems, HVAC systems, and building envelope.

The maximum deduction is $1.80 per square foot for property that reduces annual energy and power costs by 50% or more in comparison to a reference building. In the case a building is unable to meet the 50% requirement, a partial deduction of $0.60 per square foot is allowed for each separate building system meeting certain energy efficiency targets.

The deduction applies to nearly all commercial, high-rise multifamily residential, health care, institutional, public, and educational facilities and could be helpful in offsetting the cost to architecture firm clients of energy efficient enhancements. Additionally, to encourage the public sector to install energy efficient property, a government owner of a commercial building may allocate the tax deduction to the primary designer of the energy efficient enhancements, including an architecture firm.

Since the section 179D deduction was enacted in 2005, it has leveraged billions of dollars in private capital, resulted in the energy-efficient construction or renovation of thousands of buildings, and created or preserved hundreds of thousands of jobs in the process. Unfortunately, section 179D is temporary and scheduled to expire on December 31, 2013. AIA is advocating that Congress make this important tax deduction a permanent part of the tax code and make reforms to increase its effectiveness.

How Architects Use It

This is where we put the real-life example.

AIA Resources for this Provision

The AIA has partnered with alliantgroup, a firm specializing in identifying and delivering 179D incentives, to ensure that all AIA member firms are made aware of this powerful tax incentive. Visit the official AIA/alliantgroup 179D page now to learn more!


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