Commercial building owners that incorporate energy efficient design for new construction or major renovation projects, can qualify for the §179D tax deduction. This tax incentive provides a deduction of up to $1.80/SF for taxpayers meeting specific energy-efficient building requirements. Commercial property includes a wide variety of categories such as office buildings, manufacturing facilities, warehouses, auto-dealerships, event centers, hotels, and retail stores.
When most people think of §179D, residential real estate does not typically come to mind. Multifamily residential buildings, which are four stories or higher and that incorporate energy efficient designs, can qualify for the §179D tax deduction. This tax incentive provides a deduction of up to $1.80/SF for taxpayers meeting specific energy-efficient building requirements. Residential property includes a wide variety of categories such as high rise towers, multi-use properties, dormitories, and garden style complexes.
Property Type
Commercial
Number of Floors
1
Area (SF)
59,000
Location
Houston, Texas
Building Envelope
Cavity Wall with Batt Insulation
Rigid Insulation with Exterior Sheathing
Low-E Glazing
HVAC
Packaged AHUs; Air Conditioning Units
Lighting
Energy Efficient LED; LPD – 0.34 W/SF
The Source Advisors §179D engineers were engaged to analyze and certify the building as per §179D guidelines. They reviewed the building’s envelope, interior lighting, HVAC, and service hot water systems and modeled them using an IRS approved software. The proposed building energy costs were compared to the ASHRAE 90.1-2007 reference building.
The engineering team thoroughly evaluates various qualifying methods (full building qualification, partial qualifications, and Interim Lighting Rule) to calculate the maximum tax deduction that the building would qualify for.
Based on the energy model and the site inspection, Source Advisors qualified the subject property for the Envelope, HVAC and service hot water and interior lighting systems.
The total area of the building is 59,000 square feet. The projected annual energy costs for the subject building using the methods prescribed by the IRS is $45,620. The projected annual energy costs for the ASHRAE Reference building is $105,149. The property achieved 56.6% savings (excluding the process loads) in annual energy costs.
The subject property qualified under the full building qualification for §179D tax deductions of $1.80/SF or $106,200.
Difference in Annual Energy
$59,529
Achieved Savings Over Reference
56.6%
§179D Tax Deductions $/SF
$1.80
§179D Tax Deductions
$106,200
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