Tax Deductions for Commercial Buildings

Building owners who install new equipment aimed at improving the energy efficiency of their properties may be able to claim a tax deduction to offset some of the costs of the equipment. The deduction is allowed under Internal Revenue Code (IRC) Section 179D, which was expanded under the Inflation Reduction Act of 2022.

Available Tax Deductions

NEW! Energy Efficient Commercial Building Retrofit Property (EEBRP)

  • Eligible Improvements
    • Interior lighting
    • HVAC
    • Hot water systems
    • Building envelope
  • Deduction Amounts
    • IRS has released partial guidance. Final guidance will come out in early 2024 and we will update this page then.

Energy Efficient Commercial Building Property (EECBP)

  • Eligible Improvements
    • Interior lighting
    • HVAC
    • Hot water systems
    • Building envelope
  • Deduction Amounts
    • New! Years 2023 or later:
      • A deduction can be taken for the lesser of:
        • The cost of the installed property, or
        • The savings per square foot calculated as:
          • $0.50 per square foot for a building with 25% energy savings
          • Plus $0.02 per square foot for each percentage point of energy savings above 25%
          • Up to a maximum of $1.00 per square foot for a building with 50% energy savings
    • Years 2022 and earlier:
      • For property placed in service before January 1, 2023, the deduction is capped at $1.80 per square foot (indexed for inflation after 2020) for buildings with 50% energy savings. A partial deduction is available on certain property.

Additional Requirements

There are additional criteria and requirements which must be met to qualify for these tax credits. We encourage you to review the full information available on the IRS website at the link below.

More Information

Get Help Saving Energy in Your Commercial Building

For information on capturing energy-efficiency opportunities for your commercial property, visit www.energystar.gov/buildings.