A Closer Look at Recent Updates to §179D and §45L

In late December 2019, a long-awaited tax extenders package was signed, which includes the §179D Commercial Buildings Energy Efficiency Tax Deduction and the §45L New Energy Efficient Home Credit.

This extends and provides retroactive application of the §179D Tax Deduction and the §45L Tax Credit for projects placed in service from 1/1/2018 through 12/31/2020. For more details on the changes to these programs, please see below.

§179D

  • The §179D Tax Deduction will now be available for commercial buildings or residential rental structures of four or more stories placed in service from 1/1/2006 through 12/31/2020 that are either newly constructed or have undergone HVAC, lighting or building envelope upgrades.
  • Baseline requirements for the qualification of the §179D Tax Deduction will remain ASHRAE 90.1-2007.

If the target of 50% savings is met, the building will qualify for $1.80/SF (capped at the costs of the capitalized improvements).

For buildings which do not meet the 50% savings, the tax provision also allows for partially qualifying systems:

  • $0.60/SF for HVAC systems meeting 15% savings
  • $0.60/SF for Lighting systems meeting 25% savings
  • $0.60/SF for Building Envelope systems meeting 10% savings

NOTE: An Allocation letter is still required for government agencies to allocate the §179D Tax Deduction to designers and contractors. No changes have been made to the structure or requirement of the §179D Tax Deduction allocation letter.

§45L

  • The §45L Tax Credit will now be available for projects placed in service from 1/1/2006 through 12/30/2020.
  • The §45L Tax Credit is equal to $2,000 per unit for qualified owner-occupied or rental dwelling units that meet certain energy-savings standards. Construction or rehabilitation of a unit must be substantially completed after August 8, 2005 and the unit must sell or be leased before the end of 2020. The tax credit is claimed by the developer (known as the Eligible Contractor) in the year in which the unit is occupied.

Learn More

For more information about the §179D Commercial Buildings Energy Efficiency Tax Deduction and the §45L New Energy Efficient Home Credit, contact Betsi Barrett by calling 770.396.2200.