National Incentives for Energy Efficiency & Green Building

Section179D is a $0.60 - $1.80 per square foot tax deduction for building owners that have installed energy efficient equipment in either new or existing buildings. The tax deduction is applicable to all commercial buildings as well as to apartment buildings that are four stories or more.

The tax deduction is available for demonstrating energy savings from energy efficient technologies in three categories - Envelope, HVAC and Hot Water, and Lighting. Projects can qualify for the full $1.80 sq. ft. by meeting the savings target for each category. Alternatively, projects can earn $0.60 sq. ft. for each category for which it meets the savings target. Additionally, the “interim lighting rule” provides an alternative and streamlined approach for demonstrating savings from lighting.

View the Full Summary of 179D Tax Deductions

Summary of 179D Tax Deductions

	Fully Qualifying Property	Partially Qualifying Property				Interim Lighting Rule
		IRS Notice (Effective Dates)	Envelopes	HVAC & HW	Lighting
Savings Requirements	50%	2012-26 (3/12/12-12/31/20)	10%	15%	25%	25-40% lower lighting power density (50% for warehouses)
Tax Deduction*	$1.80/ft2		$0.60/ft2	$0.60/ft2	$0.60/ft2	$0.60/ft2 times applicable percentage

*(not to exceed cost of qualifying property)

While it may not always be cost-effective for every building to qualify, there are opportunities to leverage local utility company energy efficiency rebate programs to offset costs to qualify.

• The efficiency requirements for the tax deduction almost always exceed the minimum efficiency requirements of local utility rebate programs.
• The local utility rebate programs almost always use the same energy modeling software and inspections used for tax deduction.

Fannie Mae, Freddie Mac, and HUD each have programs incentivizing green building and energy efficiency for new or existing multi-family buildings. The programs offer reductions in annual interest rates or mortgage insurance premiums of up to 0.35%. Projects can qualify for these discounts by completing a recognized green building certification.

Certifications can be earned during or after construction. Not all certifications are as difficult to achieve as others, and some are very easy and inexpensive to implement. In some instances, buildings can earn a recognized certification after construction by simply benchmarking energy usage.

Separately, Fannie Mae and Freddie Mac also provide better pricing and more funds for existing buildings without a recognized certification that commit to energy efficiency and water efficiency upgrades.