IRA Energy Efficient Deduction Calculator

Section 179D provides up to $5/sqft deduction for energy efficient buildings.

Building sqft

Energy reduction %

Prevailing wage (1=yes)

Tax rate %

179D deduction

$350,000

Tax savings

$129,500

Deduction / SF

$3.50

How the math works

With PW: $2.50/SF at 25% reduction + $0.10/SF per extra % up to $5 at 50%. × SF. Tax savings = deduction × rate.

100k × $3.50/SF (35% reduction w/ PW) = $350k deduction × 37% = $129.5k tax savings.

How to Use

Enter building sqft.
Enter energy reduction %.
Enter prevailing wage paid (1=yes).
Read 179D deduction.

Frequently Asked Questions

What is 179D?

Section 179D of IRC: tax deduction for energy-efficient commercial building improvements. 2022 Inflation Reduction Act expanded from $1.88/sqft to up to $5/sqft. Requires energy reduction vs ASHRAE reference building (25-50% reduction). Applies to new construction, major renovations, lighting upgrades, HVAC improvements, envelope improvements. Non-profit owners can assign to designer/contractor.

Deduction amounts?

Base: $2.50/sqft at 25% energy reduction, sliding scale to $5.00/sqft at 50%+. Without prevailing wage: $0.50-1.00/sqft (diminished). Each percentage point of reduction above 25% adds $0.10/sqft until 50% max. Certification required from qualified professional using DOE-approved software. Typical projects: $300-2,500 per building for certification cost.

Eligible upgrades?

Lighting: LED retrofits, daylighting controls, occupancy sensors. HVAC: high-efficiency equipment, VRF systems, smart thermostats, economizers. Envelope: insulation, window upgrades, cool roofs. Interior: zone controls, ventilation. Whole-building approach usually generates highest deduction. Partial improvements (lighting-only, etc.) typically generate $1-2/sqft vs $3-5/sqft for whole-building.

When does it pay off?

On 100k sqft building: $5/sqft = $500k deduction × 37% tax rate = $185k tax savings. Certification + design cost: $15-50k. Net savings $135-170k. Combined with utility rebates and potential solar ITC, payback periods of 2-5 years common. Upgraded building also commands rent premium. Institutional commercial owners increasingly pursue 179D systematically on all renovation.