179D Federal Energy
      LED Tax Deduction
                               for Commercial Facilities

The 179D Federal Energy Tax Deduction was intended for the energy-efficient design and construction of commercial buildings. Many corporations and business owners are unaware of the tax deduction, but we can help. Largely intended to mitigate the costs of any qualifying energy improvements to commercial facilities, the deduction allows for an immediate reduction of the expense for the cost of property that would normally be recovered through depreciation over as many as 39 years. And best of all, LED lights are definitely part of the deal, so keep reading to learn more!

LED Tax Deduction Requirements

  • Facility must reduce total annual energy and power costs with respect to the interior lighting, systems, heating, cooling, ventilation and hot water systems by 50%.
  • Partial deductions allowed for 25–40% reduction of lighting power density.
  • Energy simulation is required by third-party, qualified engineering firm to justify the deduction.

Deduction Amounts

  • Partial Tax Deduction (interim lighting): $0.30–$0.60 per sq. ft. for 25– 40% reduction in lighting power density (50% in case of warehouse).
  • Abandonment Tax Deduction: Additional deduction may be applied based on remaining lifespan of current lighting.
  • Maximum Tax Deduction: $1.80 per sq. ft. for 50% reduction in total annual energy and power costs for lighting, HVAC, and building envelope (compared to a reference building that meets the minimum requirements of ASHRAE Standard 90.1-2001); not to exceed the amount equal to the cost of energy efficient commercial building property placed in service during the taxable year.

Who Qualifies

  • Building owner at the time of building improvements.
  • For public buildings, the owner may allocate the deduction to the designer (architect, engineer, contractor, environmental consultant or energy services provider) for the tax year that includes the date the property is placed in service.

Eligibility Timeframe

  • Units must be completed or renovated after December 31, 2005 but before December 31, 2013.
  • Project completed in a current tax year qualifies as a deduction.
  • Project completed in past years qualifies as a credit.

Required Documentation

  • Index page (drawing list)
  • Manufacturer specs and all lighting info (current and replacement)
  • Code analysis (square footage breakdown)
  • Lighting plans, fixture schedules, and evidence of bi-level switching
  • Utility rates

How to claim the led tax deduction

  • The deduction is taken on the Other Deductions line of the taxpayer's return.
  • Tax returns may be amended going back three consecutive tax years.

Need help determining your eligibility for the 179D Tax Deduction?

OptimalLED offers FREE FEASIBILITY STUDIES to determine your tax deduction eligibility as related to LED or other form of lighting. Contact us today to see if you qualify!

For more detailed information about the 179D Federal Energy Tax Deduction, click here to see the full IRS description.