Since the passing of the Inflation Reduction Act in 2022, the 179d tax deduction has been updated so that owners of commercial buildings or residential buildings four stories or more and designers of buildings owned by non-taxable entities can receive a benefit 5 times greater. This video explains the two additional requirements in order to receive the higher benefit.
Is your building project eligible for a tax deduction 5x larger than in previous years?
The Section 179D Energy Efficient Commercial Building Tax Deduction recently underwent a massive “facelift” following the Inflation Reduction Act. For properties placed in service in 2023 and beyond, the potential savings have skyrocketed from $1.88 to over $5.00 per square foot.
In this technical breakdown, we explain the new “sliding scale” for energy efficiency and the specific labor requirements—Prevailing Wage and Apprenticeship—that act as the gatekeepers to the maximum 5x bonus rate.
What’s New for 179D in 2025:
- The 5X Multiplier: Learn the difference between the base deduction (approx. $0.60–$1.20/sq. ft.) and the bonus deduction (approx. $3.00–$5.80/sq. ft.).
- Expanded Eligibility: It’s no longer just for government buildings. Designers can now receive allocations from non-profits, religious organizations, tribal entities, and universities.
- Lower Thresholds: The minimum energy reduction required to qualify has been lowered from 50% to 25%(measured against ASHRAE 90.1-2007).
- Retrofit Pathway: A new alternative path for existing buildings to qualify based on reduced energy intensity.
The Two Critical Bonus Requirements:
To unlock the 5x bonus rate, projects must comply with two rigorous labor standards:
- Prevailing Wage: All laborers and mechanics must be paid at or above the local prevailing rates for their specific classification.
- Apprenticeship Standards: Projects must meet “Labor Hour” and “Participation” requirements. Starting in 2024, at least 15% of total labor hours must be performed by qualified apprentices.
