What is Section 179D Tax Deduction?
Section 179D is a federal tax incentive that rewards commercial building owners and designers for energy-efficient building improvements. It provides substantial tax deductions of up to $5.94 per square foot for installing qualifying energy-efficient lighting, HVAC, and building envelope systems that reduce energy consumption compared to industry standards.
Under the OBBA, Section 179D sunset on June 30, 2026. Projects that commence after that date no longer qualify. The deduction is still available for qualifying projects that began before the sunset, and for buildings placed in service in prior years that were never reviewed.
Significant Tax Savings
Claim up to $5.94 per square foot in immediate tax deductions, potentially saving hundreds of thousands of dollars on larger properties.
Accelerate ROI on Improvements
The tax deduction significantly improves the return on investment for energy upgrades, often shortening payback periods by years.
Enhanced Building Value
Energy-efficient improvements reduce operating costs and increase property marketability, creating both immediate tax benefits and long-term value.
179D Service
Who Can Claim the 179D Tax Deduction?
Eligibility
The 179D tax deduction is available to those who own or design energy-efficient commercial buildings. The 2022 Inflation Reduction Act expanded eligibility to include tax-exempt organizations who can allocate the deduction to the primary designers of qualifying systems
Commercial Building Owners
Property owners who implement qualifying energy-efficient systems in their buildings.
Tax-Exempt Building Owners
Government, non-profit, religious, and tribal organizations can allocate deductions to their building designers.
Architects & Engineers
Designers of energy-efficient systems for government, non-profit, religious, or tribal buildings can receive allocated deductions.
Design-Build Contractors
Companies that both design and construct energy-efficient building systems for qualifying tax-exempt entities
179D Tax Deduction
Properties That Can Benefit from the 179D Tax Deduction
Estimate Your 179D Tax Deduction
Find out how much your energy-efficient building project could qualify for in federal tax deductions — up to $5.94 per sq ft.
How It Works:
Select your building type and project type, then enter your construction start date and placed-in-service date
Enter your total project cost and gross square footage
See your estimated 179D deduction range instantly, based on the minimum and maximum rates that could apply to your project depending on your building’s energy performance.
What You’ll Need
Building & Project Info
Your building type and whether the project is new construction or a renovation help determine your eligibility and applicable deduction rate.
Construction Timeline
Your construction start date and placed-in-service date confirm whether your project falls within the qualifying window.
Project Cost & Square Footage
The 179D deduction is calculated on a per-square-foot basis, so your total project cost and gross square footage are the primary drivers of your estimated deduction.
Does Not Qualify
Residential buildings must be 4+ stories to qualify for the 179D deduction.
i.e. Architect, Engineer, Design-Build Contractor
Does Not Qualify
For government buildings, only the designer primarily responsible for the technical design drawings can claim the 179D deduction.
Qualifies for Bonus Deduction Rate
Construction started before January 2023 and placed in service in 2023 or later automatically qualifies for the higher deduction rate without meeting prevailing wage and apprenticeship requirements.
Meeting prevailing wage & apprenticeship requirements qualifies for the higher deduction rate (approximately 5x the base rate).
Climate controlled buildings include HVAC systems and insulation.
Building is 40,000+ square feet
Minimum square footage requirement for 179D eligibility.
Get the Most Out of Your 179D Deduction
The 179D deduction can reach up to $5.94 per sq ft, but capturing the full benefit requires a certified energy study. Our team will analyze your building systems and manage the documentation from start to finish.
This is an estimate only. Actual deduction amounts require a Section 179D certification study to verify energy efficiency compliance.
The 179D Tax Deduction Process
Discover tax-saving opportunities with our streamlined process:
Initial Assessment
CSSI reviews your building specifications and documentation to determine eligibility for deductions of up to $5.94 per square foot for energy-efficient commercial buildings.
Professional Site Visit
A CSSI licensed engineer conducts a comprehensive on-site inspection to document your building’s energy systems including HVAC, lighting, and building envelope.
Energy Modeling
Using IRS-approved software, our engineers model your building’s energy performance against ASHRAE standards to calculate your eligible deduction amount.
Certification & Filing
CSSI provides all required certification documentation and works with your tax professional to properly claim the deduction on your tax return
Start Reducing Your Tax Burden Now
Discover the hidden tax benefits for your property or business with our no-cost preliminary analysis. Our experts will evaluate your eligibility and estimate your potential savings with no obligation.
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Testimonials
Brian and the CSSI team were great. Had a tight time frame for a cost segregation study before the tax filing deadline and they delivered a clean report quickly at a very fair price.
Robert Read has been extremely professional and knowledgeable throughout the several years we have worked with him on our cost segregation needs. His expertise, attention to detail, and clear communication have consistently made the process seamless and efficient. Robert has been a trusted resource, and I would highly recommend him to any property owner or real estate investor considering a cost segregation study.
Robert Read at CSSI has assisted our CPA firm with multiple cost segregation studies and R&D tax credit projects. He has been extremely knowledgeable, resourceful, responsive, and easy to work with throughout the process. Every client we have referred to Robert has had a seamless experience, and we have always received great feedback. I would highly recommend Robert and the team at CSSI to anyone looking for assistance with cost segregation or R&D tax credits.
Dude….what an incredible service! Tim Looney was incredibly prompt, responsive, professional, and VERY good at his job! Will OBVIOUSLY use them again next time I build a commercial building!! Thanks Tim!
Dan & his team were phenomenal!They jumped on my request and we locked in on Dec 31. Their report was well detailed & they were happy to get on a call with my CPA to do the needful. Their customer service is top notch & I recommend you engage them immediately for your Cost Seg Studies.
I needed CSSI Services for cost segregation of my short-term rentals and found their free analysis really good. The company was introduced to me by Kamilla, who explained the benefits very well. CSSI Services gave me the most thorough work with the highest tax advantages compared to two other companies. I appreciate their timely responses to emails and the availability to call Kamila when needed. They matched the promised numbers on the quote, delivered on time, and helped maximize my tax benefits. I also like that they have engineers run the study. The company is easy to deal with, professional, and offers IRS support if needed, giving me peace of mind. I also appreciate that I can always speak to one person who knows my situation, rather than a bot or chat.
I've had a great experience working w/ Brian & CSSI. The team is knowledgeable, professional, and responsive, and they make the cost segregation process easy to understand. I appreciate their expertise and attention to detail and would highly recommend CSSI to property owners and real estate professionals looking for a quality cost segregation firm.
CSSI was very helpful & accommodating doing our cost segregation studies for us, & saved us a significant amount in taxes. Highly recommend CSSI for all your cost segregation needs.
As a CPA, I know the value that cost segregation can bring to a commercial building owner. In fact, it’s one of the many tax strategies I discuss with my clients. I’ve known Tom Brodie for several years now and I often refer my clients to him when they need a cost segregation study! Tom is professional, thorough, and has helped my clients collectively uncover millions of dollars in accelerated depreciation!
Robert Read has been extremely professional and knowledgeable throughout the several years we have worked with him on our cost segregation needs. His expertise, attention to detail, and clear communication have consistently made the process seamless and efficient. Robert has been a trusted resource, and I would highly recommend him to any property owner or real estate investor considering a cost segregation study.
Robert Read with CSSI – Cost Segregation Services, Inc. has been a great resource for our CPA firm and our clients. We have referred multiple clients to Robert for cost segregation studies, and he has consistently been knowledgeable, responsive, and easy to work with. He does an excellent job explaining the process and making sure everything is handled efficiently from start to finish. Most importantly, our clients have had nothing but positive experiences working with him. I would highly recommend Robert and CSSI to any property owner or CPA looking for assistance with cost segregation.
We worked with George and his team at CSSI for our cost segregation study after our first year of running our short term rental. George made the process very smooth and was easy to reach when we had additional questions. We would recommend him and his team!
This was a very easy process and definitely worth the cost. Thank you, Nathan Nadeau, for all of your assistance and making the process of Cost Segregation so easy for us and our CPA.
Had both of my properties done here by George and his team, I will only go here for my cost seg needs. They made it understandable and painless, and the savings were amazing! I cant wait for the next one haha
Outstanding experience working with Tim Looney at CSSI. Tim is knowledgeable, responsive, and incredibly great to work with. He consistently goes above and beyond to provide excellent service and support. If you're looking for someone you can trust to get your cost seg done right, I highly recommend Tim and the CSSI team.
I had just bought two vacation rental properties, and had heard about cost segregation, but didn’t know who to use, so I asked around and got Tom Brodie’s name. We talked on the phone, and I told him about the two new properties and Tom explained how the process worked. Then he asked me if I had any other commercial properties. I said yes, but since I had owned some of them for several years, I didn’t think we could study those properties. He then told me about the Change of Accounting form and the fact that it wasn’t too late to study ALL my commercial properties! The combined result from studying all 13 of my properties was amazing, much better than I could have hoped for! When I mentioned to Tom that I needed a new CPA to handle all my real estate investments, he gave me a great recommendation! I couldn’t be happier with the total results, both the study and the new CPA that was VERY familiar with cost segregation and handling real estate investments!
Working with Kamila was on our cost segregation went smoothly, it was our first SRT s she had the patience to guide and educate us along the process. Much appreciated!
George Taylor was great to work with. He is very knowledgeable, personable, and responsive. I had 2 Cost Segs done – one on a single family home rental and the other on an STR condo. They were crucial in helping me lower my taxes and I couldn't be happier. I've shared with other investors as well. I will be using them again in the future.
Loved working with George and the whole CSSI team. They're incredibly professional and absolutely helpful in navigating what can otherwise be an intimidating process. They made it so simple! I'd highly recommend them to all friends, family, and clients in our property management company (Settled In Stays)!
Kamila was great to work with. She communicated well and made the whole process easy. Results were better than expected as well!
CSSI has been fantastic to work with and the results of the study exceeded expectations! Thank you to Kamila Kowalska and the CSSI Team! I highly recommend their services to anyone needing this very important study
Keith was fantastic to work with – I needed a lot of hand holding throughout the process! It was overall a fantastic experience and a huge cost savings; highly recommend!
Keith with CSSI was great to work with. We received great services and results to match. Thank you.
I've had a great experience working w/ Brian & CSSI. The team is knowledgeable, professional, and responsive, and they make the cost segregation process easy to understand. I appreciate their expertise and attention to detail and would highly recommend CSSI to property owners and real estate professionals looking for a quality cost segregation firm.
I worked with CSSI through Aaron Stratman. Aaron was gold. I've already recommended him to other investors!
CSSI is a great company to work with and Angela Lipsey is very knowledgeable. Highly recommend them for all of your cost segregation services.
Pretty darn amazing team that pull through when you need them. By the way the 1 star review above was given by a former star player for that same company caught red-handed with less than ethical … canned. And started a competing company. So please consider the source. And if "you" take your bitter and retaliatory review down I may consider amending mine.
David and his team were a pleasure to work with. Very responsive and quick. Would highly recommend. We will be using their services again in the future
Incredible team. Chris and team have helped me save so much on taxes! they go above and beyond, communicate effectively with my tax professionals, and know what they are doing more than anyone I've come across in the field. I have used their services on multiple occasions and know a handful of people who also utilized them through my recommendation!I highly recommend giving them a dial and at the very least, speaking to them about what they can do to help you
I used the firm for a cost segregation study of a townhouse rental. The professionalism and finished report were great. I highly recommend using them. Dr. Dan Boyd is key to helping explain how things are done.
I recently utilized CSSI for a cost segregation study on my property in California, and I couldn't be more pleased with the experience, particularly thanks to Daniel. Daniel was exceptionally knowledgeable throughout the entire process. He clearly understood the intricacies of cost segregation and was able to explain complex tax concepts in a way that was easy to understand. This made me feel very confident in the work being done. Beyond his expertise, Daniel was incredibly responsive. He consistently provided timely updates and promptly answered all my questions, which made the entire process smooth and stress-free. Thanks to Daniel's expertise and efficiency, the cost segregation study was a great success, providing valuable insights for my property. I highly recommend Daniel and CSSI to anyone in California seeking a professional and effective cost segregation service.
CSSI and specifically Dan Boyd have had a major impact on my business. The Cost Segregation study we engaged with CSSI yielded significant savings to our company. Having limited accounting/tax experience I felt very confident with sharing my information with Dan. Dan was very thorough and always available for additional questions. Dan's follow thru and professionalism were greatly appreciated.The results of the study were more than acceptable. I would recommend Dan Boyd and CSSI to anyone searching for a competent, knowledgeable Cost Segregation company.
Working with Joshua Jacobs was an exceptional experience from start to finish. His deep knowledge made the process effortless. He was always available to answer questions. Thanks to his expertise, we were able to maximize our tax deductions. I truly appreciate his professionalism, responsiveness, and dedication to his clients. I highly recommend Joshua and CSSI to anyone looking for expert guidance and significant tax savings.
Tinesha has been handling all of my Cost Seg Studies and had been doing an amazing job. She is on the ball, responsive, and turns them around quick. I use them in multiple states and could not be happier.
I got the professional service and advice from Joshua Jacob! He is very helpful!
As a financial advisor, I appreciate working with professionals who combine technical expertise with outstanding client service, and Josh Jacobs and CSSI exceeded my expectations. The cost segregation study was thorough, well-documented, and completed on time. Communication throughout the engagement was excellent, and they made the entire process seamless. They clearly know their field and delivered tremendous value, and in fact, gave me information about a Grouping Election I was unaware of that helped even more than just the Cost Seg study would have on it's own. They worked well with my CPA, and I wouldn't hesitate to recommend them to anyone considering a cost segregation study.
Amazing service and super quick turnaround. We reached out to CSSI to perform a cost seg studies for our 3 multifamily properties. Received a call back within 10 minutes and initial estimate of high and low range of additional depreciation expenses within 48 hours. We also got a quote from other 3 local companies and not a single one came even close in terms of pricing, turnaround time or detailed outcome. One firm sent me 30 pages questionnaire and requested one million reports to even give me a quote and demanded a non-refundable deposit. We were able the schedule the inspection within days and my reports came in within 2 weeks just as promised. Thank you, Aaron, and CSSI Services.
Incredible experience working with our CSSI rep. He is very knowledgeable and communicative. He saved us a tremendous amount of money and I highly recommend him and his firm.
Great experience working with CSSI on my accounting services. Very professional service.
Very happy with the study that CSSI was able to get done for me and would recommend them.
Recently used CSSI for two retail properties of mine. The cost seg studies turned out better than expected. I am a very happy client and will be using them on future studies.
Enjoyed working with CSSI. Their expertise in cost segregation really helped us. The team is incredibly knowledgeable, professional, and always willing to go the extra mile to ensure we understand every step of the process. From start to finish, the service was seamless and exceeded our expectations.
Frequently Asked Questions
How does the 179D deduction work?
The 179D deduction is a federal tax incentive designed to encourage energy efficiency in commercial buildings. It allows building owners or designers of government buildings to claim a tax deduction of up to $5.94 per square foot for qualifying improvements to lighting, HVAC, or building envelope systems. To qualify, the property must meet specific energy reduction standards as defined by IRS guidelines.
The process begins with a certified engineering analysis of the building’s energy systems. If the improvements meet or exceed the required efficiency levels, the property owner can claim the deduction for the tax year the project was placed in service. This deduction directly reduces taxable income and improves cash flow.
CSSI helps property owners and designers determine 179D eligibility, conduct the required third-party certification, and file the proper documentation. When combined with a cost segregation study, 179D can create even greater tax savings by accelerating depreciation and reducing overall tax burden.
Does the 179d deduction reduce basis?
Yes, the 179D deduction does reduce the basis of the property. When a commercial building owner claims the 179D energy efficiency deduction, the amount deducted is subtracted from the depreciable basis of the building. This means the cost basis used for calculating depreciation in future years will be adjusted downward by the amount of the 179D deduction claimed.
For example, if you install qualifying energy-efficient systems like HVAC, lighting, or building envelope upgrades and claim a $100,000 deduction under Section 179D, your building’s depreciable basis is reduced by that same amount. This adjustment helps prevent double-dipping on tax benefits while still offering a valuable incentive to invest in energy-efficient improvements.
CSSI helps building owners navigate both cost segregation and 179D opportunities. With a strategic approach, you can maximize tax savings while maintaining compliance with IRS requirements. When managed properly, even with the basis reduction, the 179D deduction can lead to significant upfront tax benefits that outweigh the adjustment.
How long has the 179D deduction been available?
How long has the 179d deduction been available?
The 179D deduction was first enacted in 2005 and has been extended and modified several times. It was made permanent in 2020 and expanded in 2022 under the Inflation Reduction Act. Per the OBBBA passed in July 2025, the Section 179D Deduction was sunset on June 30, 2026. Projects commencing after that date no longer qualify, but the deduction is still available to be claimed retroactively through look-back studies and Form 3115.
What documentation is needed to claim the 179D deduction?
What documentation is needed to claim the 179D deduction?
You’ll need certification from a qualified individual (like a licensed engineer or contractor) that the required energy savings have been achieved. This typically involves energy modeling software to demonstrate the energy cost reductions.
Can the 179D deduction be claimed for retrofits or renovations?
Can the 179d deduction be claimed for retrofits or renovations?
Yes, the deduction can be claimed for both new construction and renovations of existing buildings.
Who can claim the 179D deduction?
Who can claim the 179d deduction?
The deduction can be claimed by building owners, tenants, or designers of government-owned buildings.
How much is the 179D deduction worth?
The deduction can be up to $5.94 per square foot for buildings that achieve a 50% reduction in energy costs compared to a reference building. Partial deductions of $0.60 per square foot are available for each qualifying system.
What energy systems can qualify for the 179D deduction?
The deduction applies to three types of systems:
- Interior lighting
- Building envelope (roof, walls, windows, doors)
- Heating, cooling, ventilation, and hot water systems
What types of buildings qualify for the 179D deduction?
Qualifying buildings include commercial buildings and multi-family residential buildings four stories or higher. This includes offices, retail spaces, industrial buildings, warehouses, and apartment complexes.
What is the 179D tax deduction?
The 179D tax deduction is an incentive for designing energy-efficient commercial buildings. Building owners can claim a tax deduction for installing qualifying energy-efficient systems.
