§179D Tax Deduction
What is the §179D Tax Deduction?
The Energy Policy Act of 2005 created a tax deduction for energy-efficient buildings found in Section 179D of the Federal Tax Code. Section 179D provides a tax deduction for energy efficiency improvements to commercial buildings. Up until the IRA was introduced in 2022, the provision allowed for a tax deduction of up to $1.80 per square foot, factoring in inflation adjustments.
§179D Tax Deduction applies to commercial buildings that make substantial reductions in their energy consumption related to interior lighting, HVAC, and building envelope improvements.
Now get up to $5.00/sf leveraging bonus deductions through the IRA Prevailing Wage and Apprenticeship (PWA) requirements.
One Big Beautiful Bill Act (OBBBA) Change: The eligibility window has been shortened.
The 179D deduction is available for projects that begin construction by June 30, 2026. Tax-exempt building owners can allocate the benefit to eligible designers. For design teams and ESCOs, this is a time-sensitive opportunity. Even if your firm has low current tax liability, capturing and carrying forward this deduction can preserve long-term value.
179D Tax Deductions in 3 Simple Steps
1
Complimentary 179D Feasibility Study
The first part of our process is a Complimentary Feasibility Study. At no charge, we will evaluate all of your buildings that contain an energy efficient system to determine their potential of qualifying for a 179D tax deduction. Our feasibility studies are usually completed within 48 hours of receiving your system information.
2
179D Energy Modeling & Calculation of Savings
Given a favorable feasibility study, a contract with Walker Blue can initiate the next steps of an energy study of the building(s), and an energy model to determine the reduction of the energy and power costs as compared to the ASHRAE 90.1-2001 or ASHRAE 90.1-2007 baseline building.
3
Certification Required for 179D Tax Deductions
Once the savings are known, we do our own site visit to the building (instead of outsourcing the site visit) to verify the information that was used to create the energy model. Upon completion of the site visit, the building will be certified according to the IRS guidelines. The final report and certification is then delivered to the client.