Green > Incentives > Corporate Deductions

Energy Efficient Commercial Buildings Tax Deduction

The Energy Policy Act of 2005 established a tax deduction for energy efficient commercial buildings which is applicable to qualifying buildings and efficiency systems put in service from January 1, 2006 through December 31, 2007; subsequently extended through 2008 by Section 204 of the 2006 Tax Relief Act.

*Note this is not a comprehensive or official list. 

A deduction of up to $1.80 per sq ft is available for new or existing buildings who install

1. interior lighting
2. building envelope
3. HVAC,
4. or hot water systems that

reduce the building’s total energy and power cost by 50% or more in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1-2001. Energy savings must be calculated using qualified computer software approved by the IRS.  
 
Deductions of $0.60 per square foot are available to owners of buildings in which individual lighting, building envelope, or heating and cooling systems meet target levels that would reasonably contribute to an overall building savings of 50% if additional systems were installed.  
 
The deductions are available primarily to building owners. When energy efficient systems are installed on or in government property, tax deductions will be given to the person primarily responsible for the systems’ design.

Additional Information

• Applicable IRS Code: 26 USC § 179D
• Product Tax Credits: Energy Star
• Deduction for Energy Efficient Commercial Buildings: IRS Notice 2006-52
• Software approved by the IRS can be found on the U.S. Department of Energy website: http://www.eere.energy.gov
• Tax Relief Act (Library of Congress) - Tax Relief Act of 2006 (H.R. 6111)