Tax Deductions for Commercial Buildings

Under section 179D of IRS code, a tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50 percent of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001.

Partial deductions of up to $0.60 per square foot can be taken for measures affecting any one of three building systems; the building envelope, lighting, or heating and cooling systems. These tax deductions are available for systems “placed in service” from January 1, 2006 through December 31, 2013.

In early 2012, the IRS released a bulletin that changed the requirement to obtain a partial deduction for upgrades to HVAC and hot water systems. Retroactively effective to March 12, 2012, the energy savings threshold a building must reach to obtain a partial deduction was reduced to 15 percent with respect to a reference building that meets ASHRAE Standard 90.1-2001. Please see IRS Notice 2006-52 for specific computation and building certification requirements that must be satisfied to claim the deduction.