Section 179D of the Internal Revenue Code (179D) provides a federal tax deduction for placing in service energy efficient commercial building property (EECBP) or energy efficient building retrofit property (EEBRP) as part of interior lighting systems, heating, cooling, ventilation, and hot water systems, or the building envelope. 179D has been amended by the Inflation Reduction Act (Public Law. 117-169) for taxable years beginning after Dec. 31, 2022. It can be applied to both new construction and building upgrade projects.
DOE has new estimation tools for the Traditional (Modeling) Pathway and the Alternative (Measurement) Pathway to estimate potential federal tax deductions for installing eligible energy-efficient technologies in commercial buildings.
Traditional (Modeling) Pathway Tool
The traditional (modeling) pathway DOE estimation tool uses EnergyPlus® building energy modeling to evaluate the impact of eligible energy efficient commercial building property (EECBP) compared to the performance of a reference building model. Energy efficient property must be certified by a Qualified Individual (as defined in Notice 2006-52 section 5.05 External Link) as being installed as part of a plan to reduce the total annual energy and power costs for the above systems by 25% or more in comparison to a reference building meeting the minimum requirements of Reference Standard 90.1, along with other requirements. It can be applied to both new construction and building upgrade projects. The tool currently applies only to office buildings and strip malls, with certain building characteristics. 179D Qualified Software External Link must be used to model systems and buildings conforming to the requirements of the 179D Traditional Pathway tax deduction.
Alternative (Measurement) Pathway Tool
The alternative (measurement) pathway DOE estimation tool for energy-efficient building upgrades is performance-based and requires energy consumption data before and after the eligible energy efficient building retrofit property (EEBRP) is placed in service to document performance improvements. It can be applied only to building upgrade projects.
Please be advised that the 179D Portal may not be relied upon for any purpose in claiming the 179D deduction or in supporting an existing claim. Any information generated by the 179D Portal is solely for the purpose of creating an estimate and cannot be relied upon to establish any requirement of section 179D. The information should not be interpreted as providing tax advice. Any questions requesting tax-related guidance or tax filing support should be directed to the applicant's tax professional, accountant, or attorney.
For more information on the 179D tax deduction including general information on the compliance pathways and eligibility requirements, visit the 179D Commercial Buildings Energy-Efficiency Tax Deduction External Link website and IRS's Energy efficient commercial buildings deduction External Link page.