Understanding EPAct 179D for Commercial Lighting Retrofits
Section 179D of the Energy Policy Act allows commercial building owners to deduct the cost of qualifying energy-efficient improvements. Lighting retrofits remain one of the most common and cost-effective paths to eligibility because they directly impact building energy performance and are relatively straightforward to document.
For 2026 tax planning, understanding how lighting systems qualify under 179D—and how deductions are calculated—can materially affect project ROI, depreciation strategy, and capital planning.
What EPAct 179D Is and Who Qualifies
EPAct 179D provides an accelerated tax deduction for qualifying energy-efficient improvements to commercial buildings. Unlike traditional depreciation, this deduction can be taken immediately in the year the system is placed in service.
- Applies to commercial buildings and certain multi-family properties (4+ stories)
- Available to building owners or, in some cases, designers of public buildings
- Based on modeled energy performance compared to ASHRAE baselines
Lighting is one of three eligible systems under 179D, alongside HVAC and building envelope improvements.
Lighting Systems Eligibility Under 179D
Lighting systems qualify when they reduce lighting power density (LPD) and overall energy consumption below established baseline standards.
| Qualification Factor | Requirement | Why It Matters |
|---|---|---|
| Fixture efficiency | High-efficacy LED luminaires | Reduces connected load |
| Lighting Power Density | Below ASHRAE baseline | Core eligibility metric |
| Controls integration | Occupancy, daylight, or scheduling | Improves modeled savings |
| Scope of retrofit | Interior lighting systems | Defines deductible portion |
Most LED retrofits qualify, but documentation and modeling determine the final deduction amount.
Deduction Amounts and Calculation Methods
As of current guidance, 179D deductions are calculated on a per-square-foot basis and indexed annually.
| System Category | Maximum Deduction Range | Applies To |
|---|---|---|
| Lighting only | Partial allocation of total deduction | Standalone lighting retrofits |
| Lighting + controls | Higher allocation | Advanced control strategies |
| Whole building (all systems) | Maximum per-square-foot deduction | Coordinated upgrades |
The final deduction depends on modeled energy savings, not just equipment cost.
Partial vs. Full Building Deductions
Lighting upgrades do not need to be part of a full building renovation to qualify.
| Upgrade Scope | Deduction Type | Typical Use Case |
|---|---|---|
| Lighting only | Partial deduction | Budget-limited retrofits |
| Lighting + controls | Enhanced partial deduction | Energy-focused upgrades |
| Lighting + HVAC + envelope | Full building deduction | Major renovations |
Many property owners begin with lighting and layer additional systems over time.
Documentation and Certification Requirements
179D deductions require third-party certification by a qualified professional.
| Required Item | Purpose |
|---|---|
| Energy modeling report | Confirms performance vs. baseline |
| Installation documentation | Verifies scope and completion |
| Certification statement | IRS compliance requirement |
| As-built lighting schedules | Supports modeled inputs |
Failure to document properly is the most common reason deductions are reduced or denied.
Common Mistakes That Delay or Reduce Deductions
- Assuming all LED upgrades automatically qualify
- Failing to model lighting power density accurately
- Missing control documentation
- Engaging a certifier after installation instead of during design
179D is a tax incentive, not a rebate. Timing and documentation matter.
When Lighting Alone Makes Financial Sense
| Scenario | Why Lighting Works |
|---|---|
| Aging fluorescent or HID systems | Large LPD reduction with minimal disruption |
| Tenant improvement projects | Fast deployment and clear documentation |
| Budget-constrained capital planning | Immediate deduction offsets project cost |
| Phased energy upgrades | Allows future systems to qualify later |
Related Tax, Controls & Compliance Articles
- The DLC 5.1 to 6.0 Transition: Why 2026 Utility Rebates Depend on V6.0 QPL Listings
- Title 24 & ASHRAE 90.1-2026: Mandatory Lighting Controls for Every Commercial Square Foot
- Field-Selectable vs. Factory-Set Fixtures: Calculating Inventory and Maintenance Savings with 3-CCT Lighting
- The Switch to Selectable Wattage: How Power-Tuning On-Site Is Replacing Complex Photometric Layouts
Related Commercial Lighting Categories
EPAct 179D rewards measurable energy performance. For many commercial properties, lighting retrofits provide the most direct, lowest-risk entry point into the deduction while improving building efficiency and long-term operating costs.
Brandon Waldrop
As the lead technical specialist for our commercial lighting technical operations, Brandon Waldrop brings over 20 years of industry experience in product specification, outside sales, and industrial lighting applications.
His career began in physical lighting showrooms, where he focused on hands-on product performance and technical support. He later transitioned into commercial outside sales, working directly with architects, electrical contractors, and facility managers to translate complex lighting requirements into energy-efficient, code-compliant solutions.
Today, Brandon applies that industry experience to architect high-performance digital catalogs and technical content systems, helping commercial partners streamline the specification process and deploy lighting solutions with total technical confidence.
