What is the 179D Tax Deduction?
Section 179D is a deduction that allows building owners to claim up to a $5.00 per square feet for energy-efficient buildings or installing systems to that effect. To qualify, newly constructed or renovated buildings must meet or exceed some key energy reduction requirements and ASHRAE standards. Section 179D is meant to stimulate the economy by rewarding architecture, engineering, and design-build contractor businesses for their work on government-owned buildings.
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What are the Benefits of the 179D Tax Deduction?
You can claim up to $5.00 per square feet of the building worked on. For example, if the qualified building is 100,000 square feet, that could mean up to a $500,000 tax deduction for the work completed.
Who Can Claim 179D?
Architects, engineers, and design-build contractors that work on new or renovated government-owned buildings and structures, for example:
K-12 Schools
Military Bases
Prisons
Courthouses
Non-profit
Hospitals
Universities
Libraries
City Parks
Airport
Tribal Lands
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A Guide on How You Can Claim the 179D Deduction
The Consolidated Appropriations Act of 2021 made the Section 179D Energy Efficient Building Deduction permanent and gives business owners and government contractors a tax incentive for energy-efficient improvements to commercial and government buildings.
What Improvements are Eligible for this Tax Deduction?
Taxpayers who invest in constructing new buildings or improving their existing buildings are eligible for 179D deduction. These investments must be aimed at reducing energy use. The improvements eligible under ASHRAE standards include:
- Building envelope improvements
- HVAC improvements
- Interior lighting solutions
Maximize Your 179D Deduction: Check If You Qualify
We’ll help you determine your eligibility, ensure everything is properly allocated, and maximize your deduction for no upfront fees. Complete the form below to estimate your refund.
Here Are Some of Our Clients' Success Stories:
The following are examples from a range of industries:
Total Deduction:
$10 MM
Project Types Include: K-12 Schools, City Housing, Higher Education, Libraries, Police Stations
Total Deduction:
$6 MM
Project Types Include: Nursing Schools, Higher Education, K-12 Schools, Hospitals, College Dormitories
Total Deduction:
$2.8 MM
Project Types Include: Fire Stations, Police Stations, K-12 Schools
The 179D Study Process
To qualify for the 179D tax deduction, one needs to follow due process. Broadly there are two parts to the 179D study process.
- Evaluation: In this part, you evaluate the building to determine if they qualify for 179D tax deduction. The building is also compared to the reference model for energy efficient qualifications under ASHRAE norms. This also involves a physical visit to the building by a licensed qualified third party in the state.
- Documentation: There are two primary documents required for 179D tax deduction. Allocation letters confirming ownership of property, energy efficiency of the building and signed by authorized personnel are required for 179D tax deduction. Secondly, a report certifying the building qualifies for 179D along with an energy model that shows energy reduction compared to ASHRAE standards.
1. Discovery & Assessment
Project List – Identify Buildings Secure Allocation Letter(s) Obtain Documentation
2. Qualitative & Quantitative Analysis
Energy Modeling, Field Inspection, Certification, and Deliver Final Deduction Numbers for Filing
3. Reporting
Document Cataloguing, Summary Drafting, and Final Report
How Can We Help? The alliantgroup Advantage
- Risk-free, no-cost preliminary assessment
- Top-class staff of licensed engineers in every state who give utmost attention to every aspect of the whole process
- State-of-the-art cutting-edge proprietary software interface that aligns with the US Department energy modeling software used by the IRS
- Best licensed engineers in all 50 states
- A highly skilled team of energy modelers who specialize in the three qualifying building systems
- Well-established relationships with 8000+ government entities
alliantgroup has delivered over $3 billion in 179D tax deduction. Our track record is as follows:
- Nearly $13.3M deduction identified for 51 properties in architecture and engineering
- Close to $12.8M deduction for a design-build contractor in controls, HVAC, and sheet fabrication
- Total $2.6M deductions for design-build contractors in interior lighting and HVAC
Testimonials
Hear From Our Clients
Our specialty consulting team did an excellent job leading our study and made it as painless and simple for us as possible. It was not too time insensitive, and the benefits were well worth our while.
We are very appreciative of the worthwhile tax savings alliantgroup helped secure for our company. They’re currently being reinvested into the business as a beneficial cash injection towards our growth goals.
FAQ’s – Frequently Asked Questions
Now buildings owned by non-profits and tribal lands qualify for the 179D Deduction. The Inflation Reduction Act has expanded eligibility for more entities.
The tax deduction is available for 3 years from the time of filing an original return.
It depends – the deduction is based on square footage and documentation showing the activities performed on each project. Talk to an expert as soon as possible if you are unsure if your work on a project is eligible.
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Schedule a free consultation with our team of experts to learn more.
We’ll discuss your eligibility and help estimate your potential tax benefit.