The Energy Policy Act of 2005 created a tax deduction for energy efficient buildings found in Section 179D of the Federal Tax Code. The provision encourages building owners to increase energy efficiency in new and remodeled buildings by providing an immediate tax deduction for costs incurred that increase the energy efficiency of a building.
The energy savings are measured by reference to three main building system categories:
- Interior lighting
- Heating, cooling, ventilation, and hot water systems
- Building envelope
The larger the building the more advantageous the study would be.
The deduction is available for both new buildings and retrofits. It’s technology-neutral — not favoring any particular means of reducing energy use in a building system.
If the building is a government-owned property, such as a school or library, the government entity can allocate the deduction to one or more designers of the project.