Description
179D Commercial Buildings Energy-Efficiency Tax Deduction
The 179D tax deduction allows eligible builders to claim a tax deduction for installing certified energy-efficient systems and buildings. The CAA made the deduction for energy-efficient commercial buildings permanent. Generally, a tax deduction of $1.80 per square foot is available to owners of new or existing buildings who install interior lighting, a building envelope, or HVAC or hot water systems that reduce the related energy and power cost by 50% or more in comparison to the minimum requirements in place.
Under the latest version of the BBBA, for taxable years beginning after December 31, 2021, and before January 1, 2032, the base credit amount for certain property would be equal to $0.50 increased (but not above $1) by $0.02 for each percentage point by which the total energy and power costs for the building for the year are certified to be reduced by 25%. The bonus credit amount would be equal to $2.50 increased (but not above $5.00) by $0.10 for each percentage point greater than 25%. Credit amounts would be adjusted for inflation in years following 2022.
The BBBA would also change the lifetime cap to a 3-year cap on the maximum amount of deduction for a building. Qualifying taxpayers would also be able to elect to take an alternative, parallel deduction for energy-efficient lighting, HVAC, and building envelope costs placed into service in connection with a qualified retrofit plan. In addition, the BBBA would provide a bonus credit amount for certain property that satisfies wage and apprenticeship requirements during the “construction, alteration, or repair” of any property or building modifications.
