Energy Reduction = Tax Deduction


Section 179D, also knows as the Energy Efficient Commercial Buildings Deduction, is a federal tax reward for energy-efficient construction or renovation of commercial buildings. Initially introduced by the 2005 Energy Policy Act (EPACT), the 179D deduction can yield the building owner a federal income tax deduction of up to $1.80 per square foot for qualifying construction. Originally set to expire, the deduction is now permanently extended, and includes provisions to increase the $1.80 per square foot for inflation in the future.

For the building owner, the savings are a function of the time value of money as they accelerate writing off the cost of construction, from the standard 39-year period to an immediate deduction in the year the property is placed in service.

For the AE firm who does design work for governmental units, the benefit is even better. The tax-exempt status of  government entities means that they can allocate the deduction savings to the designer of record. Plus, that firm can take the entire deduction without the 39 year trade off!

Qualifying for 179D can be a significant cash flow boost for your AE firm, but it can be complex. Our Strategic Tax Advisory team is uniquely qualified to help your firm maximize this potentially lucrative deduction. 

The Who & What of 179D

The deduction is limited to those firms who are involved in the creation of eligible energy efficient building design specifications including architects, engineers, lighting designers, HVAC designers, and energy services consultants.

Qualifying improvements must fall into one of the following categories: building envelope, HVAC, or lighting system. The installation, repair or maintenance of a qualifying property does not qualify. To learn more about cash flow generators for your AE firm, watch our on-demand webinar.

Money for Your AE Firm

If your AE firm does governmental work, you can still take advantage of 179D. Since government entities are non-taxable, government agencies are unable to take the deduction for themselves. However, they are able to allocate the deduction to the “designer of record”. This can be a firm such as the project architect, mechanical engineer, electrical engineer, structural engineer or a combination of the contributing design team.

Don’t miss this opportunity to reap 179D benefits!

Big Savings to Reinvest

This is one example of how profitable 179D can be for AE firms.

Don’t assume you don’t qualify!

Our strategic tax advisory experts can explore all the options with you to determine how much you qualify for.

Tom Moul, CPA - Stambaugh Ness

Contact: Tom Moul, CPA

Business Development Director, Strategic Tax Services Group