Efficiency Retrofits Get Expanded Tax Credits Under Inflation Reduction Act

As part of its goal to reduce U.S. carbon emissions by 40 percent by 2030, the Inflation Reduction Act (IRA) expands tax credits for energy efficiency retrofits, reports Jack Rogers for Globe St. “Under the IRA, the maximum allowable benefit for the 179D Energy Efficient Buildings Tax Deduction will expand in 2023 from $1.88 per square foot to $5.00 per SF.”

As Rogers explains, “The 179D deduction has a tiered system of energy-use reductions that are required for the full deduction; it also allows fractional deductions for partial compliance. To be in full compliance, buildings have to reduce the energy and power cost of interior lighting, HVAC and hot-water systems by 50% or more.”

According to Jameson Hartman, VP at Real Estate Technology Ventures (RET), “This bill is likely a tipping point for envelope solutions—roof, floors, walls, etc.—utilizing new material improvements that were too costly before.” Hartman predicts that “We should see substantial growth of technologies and platforms that fall under the energy efficiency landscape, including investments in solutions that improve a building’s envelope, HVAC systems and interior lighting systems.”