How the §179D Tax Deduction Can Make Your Lighting Upgrade Even More Affordable

Written by Monte Hartranft, VP of Sales for Evolved Lighting & Energy

If you’ve been thinking about upgrading your facility’s lighting, there’s a little-known tax break that can put real money back in your pocket: the §179D Energy-Efficient Commercial Buildings Deduction.

This deduction can add up to thousands (sometimes millions) in savings, and Evolved Lighting & Energy knows how to help you get it.

Why This Deduction Exists

Buildings use roughly 40% of all the energy in the U.S.. Congress created §179D to reward building owners and designers for making them more efficient by lowering energy bills, reducing greenhouse gas emissions, and encouraging upgrades like LED lighting, advanced controls, and better HVAC systems.

The Basics (Without the Tax-Code Headache)

The §179D deduction rewards projects that cut annual energy and power costs by at least 25% compared to industry standards (ASHRAE). Thanks to the Inflation Reduction Act of 2022, it’s now bigger and easier to qualify for:

• 25% energy savings starts the deduction at $0.58 per square foot in 2025 (inflation-adjusted annually).
  Each extra 1% savings beyond 25% bumps it up a bit – up to $1.16/sq. ft.
• Meet Prevailing Wage & Apprenticeship (PWA) requirements? Your starting rate jumps to $2.90/sq. ft., maxing out at $5.81/sq. ft.
• You can claim it every three years on the same building (architects/designers every four years).
• Applies to new builds or retrofits – parking garages and residential buildings over three stories can qualify too.

Example: For a 100,000 sq. ft. warehouse meeting PWA requirements at the starting rate, that’s a $290,000 deduction.

What’s New Since 2023

• Lower qualification threshold (from 50% savings to 25%).
• No lifetime cap — claim repeatedly over the years.
• Expanded eligibility to include nonprofits, schools, hospitals, museums, and religious institutions.
• Partial deductions eliminated in favor of full-building modeling for bigger payouts.

Who’s Eligible?

• Commercial building owners (projects completed after 2006)
• Architects/designers of government or tax-exempt buildings (schools, hospitals, religious facilities, museums, etc.)
• Tax-exempt entities can allocate the deduction to the project designer

Perfect Match for Lighting Upgrades

LED lighting and advanced controls often achieve, and surpass, the 25% savings threshold. With the right design, your lighting project could qualify for the higher-tier deductions, significantly improving your ROI.

You Can Combine It With Rebates

Many people assume you can’t pair §179D with utility rebates, but you can. Stacking these incentives together can drastically cut your payback period.

Sample Scenario:

• $100,000 in utility rebates
• $290,000 §179D deduction (PWA rate at $2.90/sq. ft.)
• $70,000 annual energy savings from LEDs
  Result: The project pays for itself in under 2 years.

How Evolved Makes It Easy

Most contractors stop at “you might qualify.” At Evolved Lighting & Energy, we handle everything in-house – from the technical energy modeling to the official documentation – so you can be confident you’re getting the maximum benefit.

Our process includes:

• Free project prequalification
• Full energy modeling and building inspections
• Construction document review and design-team interviews
• Certificates of energy efficiency
• Allocation assistance for public or tax-exempt building projects
• Coordination with your tax preparer
• Complimentary audit support if needed

Deadlines Matter

Under the One Big Beautiful Bill Act 2025, construction must begin before June 30, 2026 to qualify. If you’ve been considering a lighting upgrade, now’s the time to start planning.

Bottom line: The §179D deduction is one of the most powerful tools for cutting project costs and boosting ROI. With Evolved Lighting & Energy as your partner, you’ll have experts on your side who know how to navigate every step, so you get the full benefit.

Ready to see if your building qualifies? Let’s talk. Your future self (and your accountant) will thank you.