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Tools Estimate Tax Benefits of Energy-Efficiency Projects

Tools Estimate Tax Benefits of Energy-Efficiency Projects

Posted on January 15, 2025 By rehan.rafique No Comments on Tools Estimate Tax Benefits of Energy-Efficiency Projects


WASHINGTON, D.C. — The U.S. Department of Energy (DOE) has released its 179D Portal, which hosts two free tools to estimate potential federal tax deductions for installing eligible energy-efficient technologies in commercial buildings.

Intended for commercial building owners and those who design of energy-efficient upgrades for buildings owned by governments and specified tax-exempt entities, the 179D Portal streamlines the evaluation process for estimating tax deductions for the traditional compliance pathway and for the alternative compliance pathway for qualifying upgrades, beginning in tax year 2023, a DOE press release said.

“Incorporating energy-efficient measures in commercial buildings can save money on utility bills and during tax season,” said Michael Furze, director of the DOE Building Technologies Office. “The 179D Portal will help building owners identify which combination of energy-efficient technologies can impact the bottom line in a commercial building upgrade or new construction project.”

The portal automates calculations for potential tax deductions by estimating the impact of energy-efficient upgrades. The Inflation Reduction Act of 2022 revised the 179D tax deduction to enable two different pathways for compliance: the traditional pathway based on modeled savings beyond a reference building code, and an alternative pathway for buildings in which measured energy use is reduced when compared to previous levels.

The alternative compliance pathway tool can estimate potential deductions for all commercial building types using equipment information and pre- and post-retrofit utility data through the U.S. Environmental Protection Agency (EPA) Energy Star Portfolio Manager platform. The traditional pathway tool estimates potential 179D deductions for small office buildings and retail strip malls with common building characteristics by calculating the simulated energy cost savings. DOE intends to add additional building types for the traditional pathway tool.

Tax deductions through section 179D of the Internal Revenue Code range from $0.58 to $5.81 per square foot for 2025; the highest deduction amounts are available when prevailing wage and apprenticeship requirements are met. To be eligible for a tax deduction, an energy savings of at least 25% must be achieved through interior lighting, HVAC, water-heating, and/or building envelope improvements, and there are additional requirements.

Both new construction and building retrofit projects can be eligible for the deduction.

 

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