How to Claim the Section 179D Energy-Efficient Deduction
Claim the Section 179D deduction by engaging an energy consultant to certify the property meets the ASHRAE standards for energy efficiency. The deduction is up to $5 per square foot under post-Inflation Reduction Act rules, with the full amount requiring prevailing-wage and apprenticeship compliance. Stack with cost segregation on the same property. The two work independently.
Eligibility
Section 179D applies to commercial buildings (offices, warehouses, retail, multifamily over four stories) and government buildings. The property must meet specific energy efficiency standards via interior lighting, HVAC, or building envelope improvements.
Energy consultant certifies the energy savings against the ASHRAE reference standard. Certification is required to claim the deduction.
Deduction amounts
Up to $5 per square foot for buildings meeting the energy-efficiency standards and the prevailing-wage and apprenticeship requirements. Up to $1 per square foot without the prevailing-wage compliance.
Partial deductions available for partial systems (lighting alone, HVAC alone, envelope alone). Each system has its own threshold.
Stacking with cost segregation
Section 179D is a separate deduction from cost segregation. Both can apply to the same property. Cost seg accelerates depreciation of the existing basis. Section 179D provides an additional deduction for the energy-efficient components.
Coordinate with both the cost seg engineer and the energy consultant. Each produces an independent deliverable. The taxpayer combines both on the return.
Frequently asked questions
- How does WeCostSeg coordinate with my CPA?
- Every engagement follows the three-touch CPA Coordination Protocol. Preliminary analysis CC'd to your CPA on intake, draft report shared five business days before final delivery, and Form 3115 filing coordinated when a Section 481(a) adjustment applies.
- Does OBBBA's 100% bonus apply to my acquisition?
- 100% applies to property under a binding contract on or after January 20, 2025 per Public Law 119-21. Property under a binding contract on or before January 19, 2025 stays on the legacy phase-down: 40% in 2025, 20% in 2026, 0% in 2027 and after.
- Is audit defense included?
- Yes. Every WeCostSeg engagement includes five years of written audit defense at no extra charge, aligned to the 13 Principal Elements of a Quality Cost Segregation Study under IRS Publication 5653 Chapter 4.
- Can I get a free preliminary analysis?
- Yes. Submit property details via the free proposal form or WhatsApp. Engineer-reviewed estimate returned within four business hours during US Eastern hours.
Zawwad Ul Sami, Founder
Zawwad Ul Sami is the founder of WeCostSeg, a founder-led cost segregation firm serving real estate investors across the US. He focuses on strategy, pricing, and the firm's overall direction.