Using Tax Incentives to Offset Rising Construction Costs from Tariffs

‍

‍

With new tariffs increasing the cost of materials like steel, aluminum, and solar panels, building owners, developers, and designers are facing tighter margins and steeper upfront costs on both public and private projects. These rising expenses can strain budgets, but federal tax incentives—including 179D, 45L, and the Clean Energy Investment Tax Credit (ITC)—offer powerful ways to cushion the impact.

At TaxTaker, we specialize in helping clients unlock these incentives and recover meaningful savings on qualifying projects.

What’s Happening with Tariffs?

Recent trade policy changes have introduced a new wave of tariffs on imported construction materials, particularly from China and other major manufacturing hubs. For professionals across real estate development, construction, and architecture/engineering, this means:

• Higher prices for key materials
• Budget strain on both public and private projects
• Reduced ROI unless cost-saving strategies are deployed

Thankfully, multiple energy-related tax incentives are available to help offset these cost increases while promoting smarter, greener building choices.

The Big Three Incentives That Can Make Difference

1. 179D: The Energy Efficient Commercial Building Deduction

The 179D deduction allows building owners—and designers of government or nonprofit-owned buildings—to deduct up to $5.81 per square foot for qualifying energy-efficient upgrades to:

• HVAC and hot water systems
• Interior lighting
• Building envelope (insulation, windows, roofing)

This deduction scales based on energy performance and compliance with prevailing wage and apprenticeship (PW&A) standards. Designers can claim 179D retroactively for projects completed in the last 3 years, and building owners can go back to 2006, as long as the asset is still being depreciated.

2. 45L: The Energy Efficient Home Credit

For developers of low-rise multifamily or residential buildings, 45L offers up to $5,000 per dwelling unit for homes that meet ENERGY STAR or Zero Energy Ready Home (ZERH) standards. This incentive applies to:

• Apartments
• Multi-Family Buildings
• Planned Communities

If you’re building at scale, these per-unit savings can stack up fast—especially in affordable or workforce housing projects.

3. Clean Energy Investment Tax Credit (ITC)

Commonly referred to as the Investment Tax Credit, the ITC provides a base credit of 6% of eligible renewal energy installation costs such as solar, wind, and geothermal which can increase to 30% if PW&A standards are met.

Additional bonus credits of 10% each are available for projects that:

• Use Domestic Content (U.S.-made components)
• Are located in an Energy Community (as defined by the IRS)
• Developments in Low-Income communities (for eligible census tracts)

This credit is especially relevant for projects incorporating solar arrays, battery storage, or community solar infrastructure.

Why These Incentives Matter Even More Now

As tariffs inflate costs across construction and development, tax incentives offer a critical offset. Better yet, they reward sustainability and energy efficiency—turning high-performance buildings into high-return investments.

Here’s how the math works:

• Higher upfront costs due to tariffs = larger project budget
• Larger budget = greater value of tax incentives
• Efficient design = long-term savings + cash flow boost through incentives

Real-World Impact

Let’s say you're developing a 100,000-square-foot mixed-use facility, and tariffs have added $250,000 to your materials budget.

By meeting energy-efficiency requirements and PW&A standards:

• You could earn a 179D deduction worth $5.81/sq ft, totaling $581,000
• At a 30% tax rate, that’s $174,300 in cash savings—enough to more than offset the tariff burden

If your project includes rooftop solar or low-rise residential units, 45L or ITC credits could add even more to your bottom line.

How TaxTaker Helps

We make claiming these incentives easy and accessible—whether you’re a first-time claimant or looking to maximize savings across a full portfolio. Our team of engineers, tax professionals, and compliance experts:

• Analyzes your project plans and specs
• Determines eligibility and best-fit incentives
• Provides IRS-compliant certifications and documentation
• Helps you maximize your claim while staying audit-ready

We’ve helped clients across the country secure millions in tax savings on schools, multifamily housing, healthcare facilities, commercial offices, and mixed-use developments.

Let’s Talk

Have a project underway—or one you recently completed? Let us show you what’s available.

From 179D and 45L to the ITC, TaxTaker can help you turn sustainability into a tax advantage and recover thousands—sometimes millions—in value. Reach out to our team today to get started with a free estimate.