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Section 179D Energy Efficient Commercial Building Deduction

Claim Up to $5.00/sqft for
Energy-Efficient Buildings

Section 179D offers substantial tax deductions for energy-efficient commercial building improvements. Combine with cost segregation to maximize every deduction available to your property.

Calculate Your Deduction →

What Is Section 179D?

A powerful tax deduction for energy-efficient commercial buildings.

Section 179D provides a tax deduction of $0.50 to $5.00 per square foot for commercial buildings that meet energy efficiency standards. Originally enacted in 2005 and made permanent by the Inflation Reduction Act of 2022, this deduction rewards building owners and designers who invest in energy efficiency.

The deduction applies to improvements in three areas: building envelope (insulation, windows, doors), HVAC and hot water systems, and interior lighting. Buildings that achieve a 25% or greater reduction in energy use compared to ASHRAE standards qualify.

Deduction Tiers

Minimum: $0.50/sqft25% energy reduction
$1.00/sqft25% reduction + prevailing wage
$2.50–$5.00/sqft25–50% reduction + prevailing wage + apprenticeship

Who Qualifies for 179D?

More building owners and designers qualify than you might think.

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Commercial Building Owners

Office, retail, industrial, and multifamily (4+ stories) building owners who make energy-efficient improvements.

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New Construction

New commercial buildings designed and built to meet ASHRAE energy efficiency standards.

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Retrofits & Renovations

Existing buildings that undergo energy-efficient upgrades to envelope, HVAC, or lighting.

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Government Building Designers

Architects and engineers who design energy-efficient improvements for government-owned buildings.

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Multifamily (4+ Stories)

Apartment buildings with 4 or more stories above grade qualify as commercial for 179D purposes.

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Tax-Exempt Entity Designers

Designers of buildings for tax-exempt organizations can claim the deduction themselves.

Estimate Your 179D Deduction

Estimated 179D Deduction
$0

Get your 179D estimate by email + learn how cost seg can add even more savings

179D + Cost Segregation: Maximize Every Deduction

These two strategies work together to deliver the biggest possible tax benefit.

Section 179D

  • Deduction for energy efficiency
  • Up to $5.00/sqft
  • Applies to HVAC, lighting, envelope
  • One-time deduction
  • Requires energy modeling study

Cost Segregation

  • Accelerated depreciation
  • 15–25% of basis reclassified
  • Applies to ALL building components
  • Ongoing annual benefit
  • Engineering-based analysis

Own a commercial building? You may qualify for BOTH deductions. Order a cost segregation study and ask us about 179D eligibility.

Frequently Asked Questions

Section 179D is a tax deduction for energy-efficient commercial buildings that provides $0.50 to $5.00 per square foot for buildings that meet energy efficiency standards set by ASHRAE. Made permanent by the Inflation Reduction Act of 2022, it rewards building owners and designers who invest in energy-efficient building envelope, HVAC, and lighting improvements.
Both. Retrofits and renovations qualify if they meet the energy reduction threshold. Whether you are constructing a new building or upgrading an existing one, improvements that achieve a 25% or greater reduction in energy use compared to ASHRAE reference standards can qualify for the deduction.
The Inflation Reduction Act requires prevailing wage and apprenticeship standards for the higher deduction tiers. Without meeting these requirements, the base deduction rate is $0.50 per square foot. With prevailing wage and apprenticeship compliance, the deduction can reach up to $5.00 per square foot for buildings achieving a 50% or greater energy reduction.
Yes! They apply to different aspects of your building. Cost segregation accelerates depreciation on building components by reclassifying them into shorter recovery periods (5, 7, and 15 years instead of 39). Section 179D is a separate deduction specifically for energy efficiency improvements. Using both strategies together maximizes your total tax benefit.
Yes, 179D requires a qualified energy modeling study performed by a licensed professional engineer or contractor. This study certifies that your building meets the required energy efficiency standards compared to ASHRAE reference buildings. This is separate from a cost segregation study.
We specialize in cost segregation studies. For 179D, we recommend working with a qualified energy engineer who can perform the required energy modeling certification. However, many of our clients combine both strategies for maximum benefit — order a cost segregation study with us and pair it with a 179D study from an energy specialist.

Own a Commercial Building?
Maximize Every Deduction.

Start with a cost segregation study to accelerate your depreciation — then explore 179D for additional energy-efficiency deductions. Studies start at $1,495.