A nearly 20-year-old tax deduction for sustainable building practices is seeing a new wave of demand following federal action to expand the incentive.
First codified in 2006, the Energy-Efficient Commercial Building Property Deduction, known colloquially as the 179D, acts as an accelerated depreciation deduction for energy-efficient upgrades, such as improved HVAC, lighting and building envelope systems.
The 2022 Inflation Reduction Act strengthened the incentive by increasing the amount of savings a building owner can achieve and expanding eligibility to more individuals and entities. The deduction allows for a potential maximum benefit of up to $5.36 per square foot for buildings placed in service in 2023 and up to $5.65 per square foot for buildings placed in service in 2024 – up from $1.88 per square foot for buildings placed in service prior to 2023.
“The Inflation Reduction Act took something that was already good and made it a lot better,” said Mark Bacon, a practice lead in the Energy Incentives division at Leyton, an international consulting firm that specializes in a broad spectrum of tax credits and incentives, including the 179D deduction.
“Now, a lot more people are paying attention.”
The expansion of 179D is likely to advance the adoption of the Commercial Property Assessed Clean Energy program in Texas. The incentive will enable more property owners to incorporate C-PACE-eligible improvements, paving the way for more opportunities to tap into C-PACE financing.
Bacon sat down with Lone Star PACE to explain how the 179D incentive works, which projects are eligible and how it can be paired with C-PACE to maximize investment in energy-efficient systems. For more information, schedule a call with our team today.