Construction / 1 min read
Section 179D Tax Deduction for Energy-Efficient Buildings
When profit margins are slim, and market competition is fierce, every dollar matters. There is a little-known and often overlooked tax benefit for some projects that achieve energy savings once a project is fully operational, and if achieved, a project becomes eligible for a federal tax deduction under Section 179D of the Internal Revenue Code. As of September 1, 2023, if the project owner is already a tax-exempt entity and would have no use for the tax deduction, the owner may now elect to fully allocate (aka transfer) its tax deduction to the contractor, design professional, or even a subcontractor under Section 179(d)(3) of the Internal Revenue Code. Whether a project participant qualifies depends on that party's involvement related to the mechanical, electrical, and building envelope design or equipment/materials selection. Even a contractor (without any design-team whatsoever) can qualify. Contact us to evaluate whether this income tax deduction is applicable to your project, and if so, incorporate provisions into your contracts to take advantage of this little-known tax benefit.