The tax deduction amount is calculated per square foot of the building and depends on the site energy use intensity (EUI) and use of prevailing wage in the workforce. Details provided in the table below.
For tax exempt entities, the IRA allows the tax deduction to be allocated to the person responsible for designing the property in lieu of property owner—these parties can include engineers, architects, contractors, energy services providers and environmental consultants.
In a Section 179D study, a qualified third party—separate from the designer taking the Section 179D deduction—uses IRS-approved energy software to model the energy performance of the building and improvements. The qualified third party must be a professional engineer (PE) licensed in the state where the building is located. The third party must review the results of the energy model and verify that the improvements meet the applicable energy-savings thresholds using the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) standards. The qualified third-party must also sign a certification document for the Section 179D deduction stating they have examined the energy model and support the allocation of the deduction to its respective designer. This certification document must then be signed by the designer and the building owner, allocating the deduction to the qualified taxpayer.