Turn energy-efficient upgrades into tax savings with 179D deductions and 45L credits.
The Energy Policy Act of 2005 (EPAct) and the Inflation Reduction Act of 2022 (IRA) created lucrative tax incentives, including the 179D deduction and the 45L credit, to encourage energy-efficient construction and improvements in both commercial and residential buildings. 179D was made a permanent incentive in 2020, and 45L was scheduled to be in effect until 2032. Designers and builders of non-profit building projects are also eligible for the incentives.
As part of a dramatic policy shift under the One Big Beautiful Bill (OB3) Act of 2025, both incentives have now been repealed and will terminate as of July 2026. While this is unwelcome news for strategic investors who are also environmentally conscious, they can still gain potentially thousands in tax savings (up to $5.94/sq. ft. or $5,000/unit) if they begin their projects soon.
However, qualifying for these incentives involves navigating a maze of technical requirements. CRS helps forward-thinking investors manage the nuances of the new rules and adjusted OB3 Act timelines to secure the highest possible tax savings for their energy-efficient commercial or residential projects. Our experienced engineers are well-versed in energy codes and tax regulations, ensuring your projects are certified and IRS-compliant.
Claim immediate deductions or credits for energy-efficient projects, improving your cash flow.
Energy-efficient buildings are more attractive to tenants and buyers, increasing their market value.
Lower your operating expenses and contribute to a greener environment.
Potentially claim tax benefits for eligible projects completed in previous years.
Scroll left to right to check the whole table data.
The table below outlines the dramatic shift in maximum tax benefits available through 179D and 45L prior to 2023 up through the time they expire in July of 2026. Amounts are determined by the year the building is placed in service, with the exception of the final eligibility deadlines in 2026, which are governed by the building’s construction start date (179D) or acquisition date (45L).
Maximum Tax Benefit | Before 2023 | 2023* | 2024* | 2025* |
|---|---|---|---|---|
179D Deduction | $1.88 / sq. ft. | $5.36 | $5.65 / sq. ft. | $5.81 / sq. ft.
|
45L Credit | $2,000 / unit | $5,000 / unit
| $5,000 / unit | $5,000 / unit
|
Maximum Tax Benefit | Before 2023 | 2023* | 2024* | 2025* | Jan – June 2026* | Starting July 2026* |
|---|---|---|---|---|---|---|
179D Deduction | $1.88 / sq. ft. | $5.00 / sq. ft. | $5.65 / sq. ft. | $5.81 / sq. ft. | $5.94 / sq. ft. | $0 – $5.94+ / sq. ft. |
45L Credit | $2,000 / unit | $5,000 / unit
| $5,000 / unit | $5,000 / unit | $5,000 / unit | $0 |
*Tax benefits are reduced if prevailing wage and apprenticeship requirements are not met, and may adjust for inflation in subsequent years.
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Deductions and credits allowed through the incentives are based on a combination of the year the building is placed in service, meeting the final eligibility timelines, and adherence to prevailing wage and apprenticeship requirements. Refer to the Evolving Tax Benefits table above for specifics or give us a call to clarify any questions you have.
To take advantage of these tax incentives, building investments must achieve energy cost reductions beyond specific ASHRAE energy code standards for 179D and Department of Energy program requirements for the 45L credit.
While the potential tax benefits significantly increased as part of the IRA, the requirements to receive them also became more complicated. Incentives are granted based on a sliding scale. To gain the maximum return possible, project planning must include an early focus on using correct energy methodologies, meeting more stringent compliance requirements (e.g., prevailing wage and apprenticeship minimums), and establishing project checkpoints.
Additionally, both 179D and 45L energy-efficient building projects must be certified by a qualified third party to ensure that they satisfy all energy requirements specific to the year the building was placed in service.
Capital costs associated with these commercial building systems can potentially qualify for 179D:
Owners and tenants of many types of commercial buildings can benefit from energy-efficient upgrades and potentially qualify for tax incentives. Some common examples include:
Additionally, architects, engineers, designers, and other contractors who have implemented energy-efficient designs for government-owned and other tax-exempt buildings can now benefit from the deduction. Building types include:
The 45L tax credit is available to owners or developers of energy-efficient residential dwellings. Building types include:
Yes, both the 179D deduction and the 45L credit can apply to new and existing buildings that meet specific energy efficiency criteria.
To apply retroactively, you typically must file an amended tax return. 179D claims can be filed up to three years from the original filing date. 45L claims are generally available for projects completed within the last three years.
Complex eligibility requirements for the 179D deduction and the 45L credit are set by a combination of federal government and industry organizations and programs. These include the U.S. Department of Energy, Environmental Protection Agency, International Energy Conservation Code (IECC), the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) and the IRS’ Internal Revenue Code as updated by the Inflation Reduction Act (IRA) of 2022.
CRS ensures compliance with detailed 179D and 45L requirements while maximizing your tax benefits. Our experts specialize in ASHRAE and IECC standards as well as newer standards set by the IRA. We streamline all energy modeling, testing, and documentation needed to complete your certification report, thus reducing administrative burden and IRS risk. We are committed to staying up to date with evolving standards and regulatory changes, ensuring that projects consistently meet the latest requirements.
