Insights

At Free Hill Capital, we are committed to helping businesses and organizations leverage financial opportunities that drive sustainable growth. The Section 179D tax deduction is a prime example of how energy efficiency initiatives can align with cost savings and environmental responsibility. Established under the Energy Policy Act of 2005, Section 179D incentivizes energy-efficient upgrades in commercial buildings, enabling organizations to reduce energy costs and take a step toward a greener future.

What is Section 179D?

Section 179D provides a tax deduction for implementing energy-efficient upgrades in three critical areas: heating, ventilation, and air conditioning (HVAC) systems; lighting systems; and building envelopes (insulation, windows, and walls). This deduction can amount to up to $5.00 per square foot (adjusted annually for inflation), with the maximum benefit awarded to projects achieving 50% or greater energy savings compared to ASHRAE (American Society of Heating, Refrigerating, and Air-Conditioning Engineers) standards.

Who Can Benefit?

Free Hill Capital works with a wide range of clients who can benefit from Section 179D, including:

• Building Owners: Owners of commercial properties who invest in energy-efficient upgrades can take advantage of this deduction to reduce their tax liability while lowering operational expenses.

• Architects and Designers: For government-owned buildings, such as schools or municipal offices, Section 179D allows architects, engineers, and designers responsible for the energy-efficient design to claim the deduction. This offers a unique financial incentive for those contributing to public projects.

• Tenants with Custom Build-Outs: Businesses leasing commercial spaces can also claim deductions for energy-efficient renovations, enhancing the value and sustainability of their leased spaces.

Eligible Buildings and Improvements

The Section 179D deduction applies to both newly constructed buildings and retrofitting existing ones. Common qualifying properties include:

• Office buildings

• Retail and manufacturing facilities

• Warehouses

• Apartment buildings (four stories or more)

• Publicly owned structures like government offices and schools

Upgrades that qualify for the deduction include high-efficiency HVAC systems, advanced lighting technologies (e.g., LED systems with sensors), and improvements to building envelopes, such as better insulation and energy-efficient windows.

Claiming the Section 179D Deduction

To maximize the benefits of Section 179D, Free Hill Capital ensures clients follow a clear and thorough process:

1. Energy Analysis: A certified third-party professional conducts an energy audit to validate compliance with ASHRAE standards and calculate projected energy savings.

2. Documentation: Accurate records are maintained to support the tax filing and ensure compliance with all IRS requirements.

3. Filing: Our team assists with filing the necessary documentation to claim the deduction efficiently and effectively.

Enhanced Benefits Under Recent Legislation

The Inflation Reduction Act of 2022 significantly enhanced Section 179D. The maximum deduction has increased to $5.00 per square foot for projects meeting prevailing wage and apprenticeship criteria. Additionally, eligibility has been expanded to include non-profit organizations and tribal governments, providing broader access to these benefits.

Why Free Hill Capital?

At Free Hill Capital, we specialize in helping our clients navigate the complexities of energy-efficient incentives like Section 179D. Our expertise ensures that you unlock maximum tax savings while contributing to a more sustainable future. By partnering with us, you gain a trusted advisor dedicated to aligning your financial goals with environmental stewardship.

Take the next step toward energy efficiency and financial savings with Free Hill Capital. Let us guide you through the process of leveraging Section 179D to transform your buildings into models of sustainability and efficiency. Contact us today to learn more.