If you built or upgraded a commercial building, or a residential building of four or more stories, for energy efficiency, 179D can turn that investment into a per-square-foot deduction, on new work or through a look-back on buildings you already own.
See What Your Building Qualifies ForThe deduction is available to owners of commercial buildings of any type, and to residential rental buildings of four or more stories. It applies to both new construction and retrofits, and covers three systems: interior lighting, HVAC and hot water, and the building envelope. Improve one or more of them enough to hit the energy-savings threshold, and the deduction follows.
Efficient lighting and controls, often the easiest system to qualify.
High-efficiency heating, cooling, and water systems.
Insulation, roofing, windows, and air-sealing improvements.
Energy savings are measured against an ASHRAE reference building; at least 25% savings is required, with the deduction scaling up to 50%.
If you made qualifying improvements in a prior year and never claimed 179D, the deduction may still be available for open years through the applicable procedures, subject to the relevant look-back limits. And because the IRA lets you re-claim on the same building for additional qualifying upgrades every few years, a building can generate the deduction more than once over its life.
Both. Upgrading lighting, HVAC, or the envelope on an existing building can qualify just as new construction does, as long as the energy-savings threshold is met.
Often, yes, for open years, through the applicable look-back procedures and subject to the limits. We assess whether a prior-year claim is worth pursuing.
They can work together, though the interactions and basis effects need to be coordinated. We model 179D alongside your other property deductions so nothing conflicts.
Yes. The IRA allows a new 179D deduction for additional qualifying upgrades on the same building after a few years.
This page is general information, not tax or legal advice. Section 179D eligibility, amounts, certification, and deadlines depend on the project’s facts and current law, and are determined through the required energy study and certification in coordination with your tax advisor. Novaric does not guarantee deduction amounts or any tax outcome.