Understanding Section 179D and Section 45L Energy Efficiency Tax Incentives

In an effort to promote energy conservation and climate-conscious construction, the U.S. government offers two powerful tax incentives: Section 179D for commercial buildings and Section 45L for residential properties. With recent updates in the tax law, these credits are more valuable than ever—especially for landlords, developers, and businesses planning new builds or renovations.

💡 SECTION 179D — Commercial Building Energy-Efficiency Deduction

🔍 What is it?

Section 179D provides a tax deduction for businesses or building owners that install energy-efficient systems in commercial buildings or residential buildings of four stories or more.

✅ Who Qualifies?

• Commercial property owners

• Designers of energy-efficient systems (often architects and engineers working on government buildings)

• Real estate investment trusts (REITs)

• Large multifamily developers (4+ stories)

🏗️ Eligible Improvements:

• Interior lighting systems

• HVAC (Heating, Ventilation & Air Conditioning)

• Building envelope (windows, insulation, roofing)

💰 Deduction Amount (as of 2025):

• Up to $5.00 per square foot

  
  

  (Base deduction starts at $0.50/sq. ft. and scales up depending on energy savings and prevailing wage requirements.)

📌 Key Conditions:

• Must reduce total annual energy and power costs by at least 25% compared to a reference building.

• Energy modeling and third-party certification required.

• Applies to new construction or retrofits.

🏘️ SECTION 45L — New Energy Efficient Home Credit

🔍 What is it?

Section 45L provides a tax credit for builders and developers who construct or renovate energy-efficient residential homes.

✅ Who Qualifies?

• Homebuilders

• Developers of single-family or multi-family homes

• Landlords of residential rental property (new construction or substantial renovation)

🏗️ Eligible Properties:

• Single-family homes

• Townhomes

• Apartments and condos (3 stories or less)

💰 Credit Amount:

• Up to $5,000 per dwelling unit

  (Standard credit starts at $2,500 for ENERGY STAR certified homes; increases to $5,000 for Zero Energy Ready Homes under DOE guidelines.)

📌 Key Conditions:

• Applies to homes sold or leased after construction is complete.

• Energy efficiency certification required by an eligible third-party verifier.

🧮 How 179D and 45L Compare:

🟢 Why It Matters

With energy efficiency becoming a top priority—and tax credits increasing in value—both Section 179D and 45L are strategic tools for:

• Lowering project costs

• Increasing ROI for developers and landlords

• Boosting sustainability credentials

• Reducing long-term utility expenses

🔧 Need Help Claiming These Benefits?

At Oasis Services Provider, we help developers, landlords, and business owners navigate the technical and tax compliance steps to claim every dollar they deserve.

Schedule a consultation today to discover how to apply 179D and 45L to your upcoming projects.