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Commercial Buildings Energy-Efficiency Tax Deduction (IRC Section 179D)

Program Name: Commercial Buildings Energy-Efficiency Tax Deduction (IRC Section 179D)
Program Sponsor: IRS (Federal)
Program Type:          Tax Deduction
Technology:               Energy Efficiency
Fuel:                Fuel Neutral
Eligibility:                        Owners and Tenants of Commercial Buildings
Cost:  N/A


The 179D Commercial Buildings Energy Efficiency tax deduction enables building owners to claim a tax deduction of up to $1.88 per square foot for installing qualifying systems. Tenants may also be eligible if they make construction expenditures.


Qualifying buildings include: retail buildings, office buildings, industrial buildings, apartment buildings with at least four stories and warehouses constructed between January 1, 2005 and December 31, 2013.

Owners or tenants claiming the deduction must prove a 50% reduction in energy usage by retaining a Registered Professional Engineer to calculate the property’s energy savings using an approved software from the IRS and Department of Energy’s list of certified software.

How the Program Works

A tax deduction of $1.88 per square foot is available to owners of new or existing buildings who install (1) interior lighting; (2) building envelope, or (3) heating, cooling, ventilation, or hot water systems that reduce the building’s total energy and power cost by 50% or more in comparison to a building meeting minimum requirements set by the most recent ASHRAE Standard 90.1.

Deductions up to $0.63 per square foot are available to owners of buildings who install individual lighting, building envelop, or heating and cooling systems that partially qualify by meeting certain target levels or through the interim lighting rule. The available deductions are summarized as follows:


  Fully Qualifying Property Partially Qualifying Property Interim Lighting Rule


HVAC and HW Lighting
Savings Requirements 50% 10% 15% 25% 25-40% lower lighting power density (50% for warehouses)
Tax Deduction Taxable years before 2021 $1.80/ ft² $0.60/ ft² Up to $0.60/ ft²
Taxable year beginning 2021 $1.82/ ft² $0.61/ ft² Up to $0.61/ ft²
Taxable year beginning 2022 $1.88/ ft² $0.63/ ft² Up to $0.63/ ft²

Please see 179D Commercial Building Tax Deduction FAQ and IRS Notice 2008-40 for more information.

Calculations must be calculated using the qualified computer software for buildings placed in service on or before December 31, 2020. Updates for buildings placed in service on or after January 1, 2021 will be available on the Office of Energy Efficiency & Renewable Energy tax deduction page, upon IRS release.

How to Apply

The deduction is taken on the “Other Deductions” line of the taxpayer’s return. Tax returns may be amended going back three consecutive years.

Contact Information

Internal Revenue Service (IRS),
1111 Constitution Avenue, N.W.,
Washington, D.C. 20224
(800) 829-1040