The Section 179D Commercial Building Energy-Efficient Tax Deduction (Section 179D) is now permanent, providing potential ongoing tax benefits for architecture, engineering, and construction companies.
These entities can claim the deduction after construction is complete on designed projects for government-owned buildings. Before claiming the deduction, however, there are certain rules and regulations companies should be aware of based on timing and contract terms.
Below, learn how the Section 179D tax deduction could provide your company with significant tax savings as well as industry-related guidelines and restrictions.
What’s the section 179D tax deduction?
Through claiming a Section 179D deduction, taxpayers can receive as much as $1.80 per square foot when making efficiency improvements above certain energy thresholds to commercial buildings. The $1.80 per square foot deduction also now increases slightly each year to account for inflation.
On Dec. 28, 2020, Section 179D was made a permanent part of the US tax code in the Consolidated Appropriations Act, 2021. This change means architecture, engineering, and construction companies can claim the deduction beyond 2021 — letting them plan for and generate significant tax savings from construction projects for government entities.
Can engineering, architecture, and construction entities claim a section 179D deduction?
Yes. The Section 179D deduction can be allocated to engineering, architecture, and construction entities that are responsible for the design components of government-owned, energy-efficient buildings.
Because the owners of these public buildings are nontaxable entities, the deduction is then passed on to the primary designers of the buildings — in this case, engineering, architecture, and construction entities that qualify as designers. The purpose of the deduction is to incentivize designers of government-owned buildings to utilize energy efficient systems and components within the construction projects.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.