Tax Deductions for Commercial Buildings
Section 179D of the Internal Revenue Code allows deductions for energy-efficient commercial buildings. The following information applies to building upgrades completed on or before December 31, 2022.
The Inflation Reduction Act extended and expanded these tax deductions. We will have updated information on this page as soon as guidance becomes available from the IRS.
What Can Be Deducted?
A tax deduction of up to $1.80 per square foot is available to owners or designers of commercial buildings or systems that demonstrate a 50% reduction in energy usage accomplished solely through improvements to the heating, cooling, ventilation, hot water, and interior lighting systems. Partial deductions of up to $.60 per square foot can be taken for qualifying measures.
How to Apply for the Tax Deduction
The IRS requires that you use a qualified software program to model your energy usage. See a list of qualified software for calculating energy savings.
- IRS Notice 2006-52 (6/2/2006) provides guidance on the deduction for energy-efficient commercial buildings.
- IRS Notice 2008-40 (4/7/2008) - Amplification of Notice 2006-52 sets forth additional guidance not covered in the initial notice.
- IRS Notice 2012-26, page 5, provides savings percentages for a partial tax deduction.
- Renewable Energy Tax Credits
Get Help Saving Energy in Your Commercial Building
For information on capturing energy-efficiency opportunities for your commercial property, visit www.energystar.gov/buildings.
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