The 179D Deduction, known as the Energy-Efficient Commercial Buildings 179D Tax Deduction, was introduced in 2005 under the Energy Policy Act. It incentivizes commercial building owners and designers of tax-exempt buildings to reduce energy usage. Rewards are given for implementing efficient components like HVAC systems, lighting, and building envelopes in new constructions or renovations. A significant development occurred in 2020 when 179D was permanently integrated into the tax code, underscoring the government’s commitment to energy efficiency.

Architects, Mechanical Engineers, Electrical Engineers, and other designers of tax-exempt buildings, as well as commercial building owners, can benefit. While commercial building owners who are taxpayers enjoy accelerated depreciation, non-tax-paying entities, such as governments and educational institutions, can still incentivize energy efficiency. The expansion of 179D allows these entities to allocate deductions to the taxpaying designers of the energy-efficient properties.