179d Energy Efficient Commercial Building Deduction
The 179D incentive is a federal tax deduction of up to $1.80 per square foot available to architects, engineers, and contractors for their work on newly constructed and renovated government buildings. Designers and builders of K-12 schools, city and county buildings, state universities, and federal and military buildings are taking advantage of this lucrative tax incentive for energy efficient HVAC, lighting, and building envelope scope of work. Commercial property owners are also able to claim this valuable tax incentive.
179D - FAQs
Construction companies can collect tax deductions from the 179D program going back three years of structures built. The deadline to file depends on when the builder filed their taxes for that year.
For example, in our current year 2025, a builder can collect the 179D tax deductions for structures built in 2021 up until the date (in 2025) that they filed their 2021 taxes in 2022. So if the builder filed for an extension in 2022 for their 2021 taxes and filed on 10/15/2022, then they have until 10/15/2025 to file for their 2021 179D tax deductions.
Builders will then be required to amend their previous years’ federal income taxes to apply the new deductions, thus lowering their taxable income for those previous years, resulting in tax refunds sent to the builder.
Prior to 2023, a builder can receive up to $1.80 per square foot for commercial properties in the form of a tax deduction.
For 2023, the builder can receive up to $5.36 per square foot and for 2024 through current years, up to $5.65 per square foot.
Tax deductions received in the current year of construction from the 179D program reduces the taxable income for the current tax year.
For commercial properties, a builder can receive up to $5.65 per sq. ft. in the form of tax deductions.
There are a few more requirements for 2023 including a blower test. Buildings need to meet a certain requirement to pass inspection as well as earn the credit.
A builder can collect these credits for new homes built each year going forward through 2035.
Once our company has certified the builder’s structures for the 179D program, we will complete the IRS form 8908 for the builder for every year awarded (going back three years).
For tax deductions awarded on previous years, the builder needs to file an amended federal income tax return using the 8908 form. The tax deductions will lower their tax liability for those previous years and any overpayment in taxes will be refunded to the builder.
For 45L tax credits received in the current year, the builder will receive tax deductions against taxes owed.
The auditor will request the 45L certificates and addresses to the properties. The auditor will verify that there is in fact a residence at the address on the certificate (usually by using Google) then they approve the audit.
If there is additional information needed, the builder can reach our company and we will provide any additional information needed.
It takes the IRS typically 2-4 months to amend the returns and send the refund checks. If a builder has a direct deposit setup with the IRS, then the refund typically get deposited in 1-2 months.