Elevate Your Engineering Firm's Bottom Line: Unleashing the Power of the 179D Tax Deduction

In this episode, Abby Massey, PE, PMP, LEED AP, explains how Engineering Firms and Contractors can utilize the 179D Energy Efficiency Tax Deduction to secure work and increase their bottom line.

Abby Massey, PE, PMP, LEED AP, is the Tax Incentives Director for Tax Talker and shares her years of experience with sustainability and energy efficiency, and the Inflation Reduction Act will walk us through the following:

What is 179D, How is it Calculate, What is the Process for Taking a client through a 179D Study, How do Design Firms Qualify, How do Contractors Qualify, Changes to 179D from the IRA (Inflation Reduction Act).

Here is a detailed explanation of Section 179D Energy Efficient Tax Deduction.

The Section 179D tax deduction is a compelling federal tax incentive for companies designing and constructing energy-efficient systems in commercial buildings. Specifically, Section 179D is eligible for work performed on three systems; interior lighting, HVAC (heating, cooling, and ventilation), hot water, and building envelope.

For properties placed into service in 2022 and prior, a tax deduction of up to $1.80 per square foot is available for installing these systems, which results in 50% or greater energy savings compared to a baseline standard. There is eligibility to claim a $0.60 per square foot deduction for upgrades that result in less energy savings. Properties placed into service in 2021 or 2022 are adjusted for inflation, resulting in a higher deduction rate.

Thanks to the Inflation Reduction Act of 2022, properties placed into service in 2023 or later can now achieve a tax deduction of up to $5 per square foot for achieving 50% or greater energy savings. There is eligibility to claim a $2.50 per square foot deduction for upgrades that result in a 25% energy savings, with an additional $0.10 per square foot for every 1% increase in savings.

Qualifying Projects. New construction, renovations, and additions to commercial or high-rise residential buildings most often qualify. At the time of construction or as part of an upgrade process, energy-efficient building systems must be installed that reduce the property’s energy profile compared to a baseline standard. The energy reduction requirement varies based on the energy-efficient system installed in the project. The baseline standard (ASHRAE 90.1) measures the energy savings changes depending on the year the project was completed.

Who Qualifies? Many companies can qualify to claim the Section 179D deduction. In addition to commercial building owners, other companies such as architects, engineers, general contractors, construction managers, energy service providers, and specialty contractors (mechanical, electrical, glazing, etc.) may qualify for their work on buildings owned by government and non-profit entities. In other words, the powerful savings potential is also available to those involved in the design and construction industry.

This video is eligible for PDH credits in most states.

If you need help with 179D, please reach out to us today.

For support on navigating this tax code contacts are as follows:

Insight Partners in Carolinas, Georgia: ⁠⁠www.insightusa.com⁠⁠

Hobbs & Associates in VA, TN, MD, and AL: ⁠www.hobbsassociates.com⁠⁠

Energy Transfer Solutions in the Tri-State area of Pennsylvania, Delaware, and New Jersey: ⁠⁠www.etshvac.com⁠⁠

Klima New Jersey LLC: ⁠⁠www.klimanj.com⁠⁠

Klima New York, LLC: ⁠⁠www.Klimany.com⁠⁠

Etairos HVAC in Tennessee, Mississippi, and Arkansas: ⁠⁠www.etairoshvac.com

Alternatively, don't hesitate to contact Abby Massey with Tax Talker at [email protected].