Tax-Based Solutions

Section 179D and Section 45L

Section 179D and Section 45L are two different provisions in the United States tax code that provide incentives for energy efficiency in buildings. Below are updated descriptions of both. These provisions aim to incentivize energy-efficient practices in both commercial and residential building sectors, contributing to environmental sustainability and reduced energy consumption. It’s essential to consult tax professionals or the latest tax regulations for the most up-to-date information on these incentives.

Section 179D Energy Efficiency Deduction:

  • Purpose: Section 179D encourages energy efficiency in commercial buildings by providing a tax deduction for property owners or designers who invest in qualifying energy-efficient systems and features.
  • Eligibility: Available to building owners or designers of new or existing commercial buildings that meet specific energy efficiency standards.
  • Deduction Amount: The deduction can be up to $5.00 per square foot of the property if certain energy-saving criteria are met. Criteria include improvements in lighting, HVAC systems, and the building envelope.
  • Certification: A third-party qualified individual must certify that the building meets the required energy efficiency criteria to claim the deduction.

Section 45L Energy Efficient Home Credit:

  • Purpose: Section 45L provides a tax credit for homebuilders who construct energy-efficient residential properties.
  • Eligibility: Available to eligible contractors who build or substantially renovate energy-efficient homes that meet specific energy-saving criteria.
  • Credit Amount: The credit is up to $5,000 per dwelling unit and is based on the energy efficiency level of the home.
  • Energy Saving Criteria: Homes must achieve a 50% reduction in heating and cooling energy consumption compared to a comparable dwelling unit constructed under the 2006 International Energy Conservation Code.

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