Tax Deductions for Commercial Buildings

Section 179D of the Internal Revenue Code allows deductions for energy efficient commercial buildings. The following information applies to building upgrades completed on or before December 31, 2022. The Inflation Reduction Act of 2022 extended and expanded these tax deductions.

What can be deducted?

A tax deduction of up to $1.80 per square foot is available to owners or designers of commercial buildings or systems that demonstrate a 50% reduction in energy usage accomplished solely through improvements to the heating, cooling, ventilation, hot water, and interior lighting systems. Partial deductions of up to $.60 per square foot can be taken for qualifying measures.

How to apply for the tax deduction

The IRS requires that you use a qualified software program to model your energy usage. See this list of qualified software for calculating energy savings.