What Can Make Your Property Qualify under Section 179D

As the years have passed, Congress and the U.S. Government have taken a number of steps that promote green construction and energy usage. Over the last few years, this has been done primarily through legislations and provisions designed to benefit people investing in green technology and lower the energy consumption of their properties. One of the landmark acts in this case was the Energy Policy Act of 2005.
This act created a tax incentive for home and commercial building owners, developers, and in some situations architects and engineers. One of the leading incentives provided in this act has been through the section 179D. This section allows homeowners to enjoy a tax deduction of up to $1.80 per square foot on qualifying projects.

Who Can Qualify?

The deduction for green building is not all encompassing and it is typically available to commercial building owners, and the lessees of those buildings who make energy efficient upgrades and modifications to said building. The buildings can include:

  • Warehouses
  • Office buildings
  • Retail buildings
  • Industrial buildings
  • Apartment buildings (at least 4 stories)

A large number of buildings in the US are owned by the government; whether at a local, state, or a federal level. The owners of these buildings cannot claim the 179D tax deductions since they are, as governments, non-taxable entities. However, under the section 179D, there is room for the tax deductions to be transferred to designers of the building under the special rule for government property.
The eligible receiver of the 179D Tax Deduction benefit of government buildings can be anyone in an extensive list, which includes, contractors, engineers, architects, environmental consultants and energy service providers. All of whom need to have contributed in some way or another to helping the building meet the new energy standards that make it eligible for the tax deductions. Government buildings where this section can be used include buildings such as:

  • Government offices
  • Libraries
  • Town halls
  • Schools
  • State universities
  • Courthouses
  • Military bases
  • Airports
  • Transportation facilities
  • Post offices
  • And others

Renovation And New Constructions

A common misconception about the application of the section 179D is that it only applies to new buildings that are constructed keeping in mind the green building requirements. However, the section ensures tax deductions of up to $1.80 can be claimed by new constructions or renovations/retrofits. The only thing that needs to be taken into account is for the building to have been constructed after or during the year 2006.