Tax incentives play a crucial role in promoting energy-efficient building practices. Among the most significant are Section 179D and Section 45L, each offering substantial financial benefits. But which one is right for your project? This blog will compare these two incentives to help you make an informed decision.
Section 179D: Section 179D, also known as the Energy Efficient Commercial Buildings Deduction, is designed to encourage energy-efficient improvements in commercial buildings. It provides tax deductions of up to $5.00 per square foot for energy-efficient upgrades. These upgrades can include HVAC systems, interior lighting, and building envelope enhancements. To qualify, improvements must achieve at least 25% energy savings compared to an ASHRAE 90.1 baseline.
Section 45L: Section 45L focuses on residential buildings and offers tax credits for constructing or renovating energy-efficient homes. The credit provides up to $5,000 per unit for homes that meet specific energy-saving standards, such as those certified under the Department of Energy's Zero Energy Ready Home program. This credit is aimed at incentivizing developers to adopt energy-efficient practices in residential construction.
Both programs have seen significant updates, particularly with the updated passing of the Inflation Reduction Act.
When deciding between Section 179D and Section 45L, consider the type of project and the potential financial benefits.
Both Section 179D and Section 45L offer valuable incentives for energy-efficient building practices, but the right choice depends on your specific project needs. By understanding the benefits and eligibility requirements of each program, you can maximize your tax savings and contribute to a more sustainable future. For personalized advice and assistance in navigating these incentives, consult with TaxTaker today and start optimizing your energy-efficient projects.
Abby Massey is an expert in applying tax incentives for clean energy initiatives. With a B.S. in Civil Engineering from Purdue University and licenses in 47 states plus the District of Columbia, Abby offers significant expertise to her role at TaxTaker as the Vice President of Energy Incentives. Her experience includes certifying over 1,400 179D deductions, achieving more than $100 million in savings for clients. As a LEED Accredited Professional, Abby is dedicated to sustainable building practices. In her role at TaxTaker, she focuses on optimizing energy incentives for clients by leveraging her in-depth understanding of the 179D program, aiming to improve business sustainability and efficiency.