§179D DEDUCTION MASSACHUSETTS
The §179D Energy-Efficient Commercial Buildings Deduction is a tax incentive designed to promote energy-efficient construction. Enhanced by the Inflation Reduction Act of 2022, the maximum §179D Deduction was significantly increased for buildings placed into service in Massachusetts starting in 2023.
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The deduction starts at 50 cents* per sqft for a 25% energy efficiency improvement over the baseline. For each additional percentage of energy reduction beyond 25%, the deduction increases by two cents per sqft, up to a maximum of $1.00* per sqft at 50% energy reduction.
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When construction meets or is exempted from the Prevailing Wage and Apprenticeship (PWA) requirements, the deduction starts at $2.50* per sqft and increases by ten cents per sqft up to a maximum of $5.00* per sqft.
*Deduction amounts increases annually based on inflation adjustments.
The §179D Deduction can be taken every three tax years when the building is placed in service in 2023 and thereafter (four in some situations).
- Example: If a taxpayer constructed a building in Massachusetts in 2008 and took a deduction of $1.80 per square foot, prior rules prevented taking additional §179D Deductions for any subsequent energy efficiency improvements. Beginning in 2023, the Inflation Reduction Act allows for additional §179D Deductions for subsequent energy improvements.
Architects, engineers, and others can benefit for design work on tax exempt entities. For buildings placed in service in 2023 and after, engineers, architects, and designers in Massachusetts can obtain §179D Deductions from tax-exempt entities, including:
- Public Organizations, such as:
- K-12 Schools, higher education, and libraries.
- Municipal buildings (police, fire stations, courthouses, and more).
- Public offices, and parking garages, airport terminals.
- Other Tax-Exempt Entities, such as:
- Charitable organizations.
- Religious institutions.
- Private schools and colleges.
- Non-profit hospitals.
- Private museums.
- Tribal governments.
- Any other organization falling under §501(c).
