7205 Instructions for Form 7205, Energy Efficient Commercial

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Instructions for Form 7205

Department of the Treasury
Internal Revenue Service

(Rev. December 2023)

Energy Efficient Commercial Buildings Deduction
Section references are to the Internal Revenue Code
unless otherwise noted.

for the building. For property placed in service after
December 31, 2022, only the section 179D deductions
claimed in the prior 3 years (4 years for an allocated
deduction) are counted towards the maximum deduction
for the building.

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Future Developments

For the latest information about developments related to
Form 7205 and its instructions, such as legislation
enacted after this form and instructions were published,
go to IRS.gov/Form7205.

What’s New

New revision of Form 7205. For energy efficient
commercial building property placed in service after
December 31, 2022, use the December 2023 revision of
Form 7205. For qualifying property placed in service prior
to January 1, 2023, use the December 2022 revision of
Form 7205.

Changes from the Inflation Reduction Act of 2022
(IRA). The following changes from the IRA may affect
qualifying energy efficient commercial building property
placed in service after December 31, 2022.
• Eligibility. Commercial building owners, as well as
designers of energy efficient commercial building property
installed on or in buildings owned by specified tax-exempt
entities are eligible. Specified tax-exempt entities include
government entities, Indian tribal governments (section
30D(g)(9)), Alaska Native corporations (section 3 of the
Alaska Native Claims Settlement Act), and organizations
exempt from tax under chapter 1.
• Deduction maximum. The maximum deduction is
$0.50 per square foot at 25% energy savings increasing at
a rate of 2 cents per percentage point increased to $1.00
per square foot at 50% energy savings (indexed for
inflation).
• Increased deduction maximum. For projects meeting
local prevailing wage and apprenticeship requirements,
the maximum deduction amount is multiplied by 5.
• Elimination of the partial deduction and the interim
lighting rule. These aspects of the deduction
computation have been removed.
• Alternative deduction for energy efficient building
retrofit property (EEBRP).The section 179D deduction
for EEBRP is effective for property placed in service after
December 31, 2022, in tax years ending after this date, if
the property is placed in service pursuant to a qualified
retrofit plan established after this date. Section 179D
requires the energy use intensity (EUI), defined later, of
the building on or in which EEBRP is installed be certified
by a qualified professional as of any date more than 1 year
after the date the retrofit property is placed in service.
Because of this requirement, the section 179D deduction
for EEBRP is not available in tax years ending on or before
December 31, 2023.
• Building lifetime maximum deduction amount.
Under prior law, all prior section 179D deductions for a
building were counted towards the maximum deduction
Dec 12, 2023

General Instructions

Purpose of Form

Use Form 7205 to:
• Calculate and claim the deduction under section 179D
for qualifying energy efficient commercial building
property placed in service during the tax year;
• Identify yourself as a designer or the building owner;
• Provide information on the person performing the
certification; and
• Provide information on the person completing the
allocation.

Who Must File

Individuals and business entities that qualify to claim the
deduction for energy efficient property (EEP) placed in
service during the tax year must file Form 7205 to claim
the deduction.

Additional Information

For more information, see section 179D. Also see the
following.
• Notice 2006-52, 2006-26 I.R.B. 1175, available at
IRS.gov/irb/2006-26_IRB#NOT-2006-52.
• Notice 2008-40, 2008-14 I.R.B. 725, available at
IRS.gov/irb/2008-14_IRB#NOT-2008-40.
• Notice 2012-26, 2012-17 I.R.B. 847, available at
IRS.gov/irb/2012-17_IRB#NOT-2012-26.
• Announcement 2023-1, 2023-3 I.R.B. 422, available at
IRS.gov/irb/2023-03_IRB#ANN-2023-1.

Definitions
Energy efficient property (EEP). This is property that is
either:
• Energy efficient commercial building property (EECBP),
or
• Energy efficient building retrofit property (EEBRP).
EECBP is property that meets the following criteria:
• Is depreciable property;
• Is installed on or in a building located in the United
States, and within the scope of Reference Standard 90.1
(defined below);
• Is installed as part of the interior lighting systems,
heating, cooling, ventilation, and hot water systems, or the
building envelope; and
• Is certified as being installed as part of a plan designed
to reduce the total annual energy and power costs with
respect to the interior lighting systems, heating, cooling,
ventilation, and hot water systems of the building by 25%

Cat. No. 93340H

or more in comparison to a reference building which
meets the minimum requirements of Reference Standard
90.1.
EEBRP is property installed according to a qualified
retrofit plan that meets the following criteria:
• Is depreciable;
• Is installed on or in any qualified building;
• Is installed as part of the interior lighting systems,
heating, cooling, ventilation, and hot water systems, or the
building envelope; and
• Is certified as being installed according to such plan.

according to a qualified retrofit plan) may claim an
increased deduction amount. You may also be eligible to
claim the increased deduction amount if the installation of
the EEP (or property installed according to a qualified
retrofit plan) began before January 29, 2023.
Prevailing wage requirements. To satisfy the
prevailing wage requirements with respect to any EEP (or
property installed pursuant to a qualified retrofit plan), you
must ensure that any laborers and mechanics employed
by you or any contractor or subcontractor in the
installation of the property are paid wages at rates not less
than the prevailing rates for construction, alteration, or
repair of a similar character in the locality in which such
facility is located as most recently determined by the
Secretary of Labor (according to Subchapter IV of
chapter 31 of title 40, U.S. Code).
Apprenticeship requirements. To satisfy the
apprenticeship requirements with respect to any EEP (or
property installed pursuant to a qualified retrofit plan), you
must ensure that, with respect to the installation of the
property, not less than the applicable percentage of the
total labor hours of the installation, construction,
alteration, or repair work (including such work performed
by any contractor or subcontractor) with respect to such
property is, subject to section 45(b)(8)(B), performed by
qualified apprentices (apprenticeship labor hour
requirements).
If the increased deduction amount criteria are met
because the prevailing wage requirement and the
applicable apprenticeship requirements are met, complete
Form 7205 and attach additional information to your timely
filed income tax return (including extensions) to claim the
increased deduction amount for energy efficient
commercial building property placed in service during the
tax year.

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Reference Standard 90.1. This standard means, with
respect to any property, the more recent of (a) Standard
90.1-2007 published by the American Society of Heating,
Refrigerating, and Air Conditioning Engineers and the
Illuminating Engineering Society of North America, or (b)
the most recent Standard 90.1 published by the American
Society of Heating, Refrigerating, and Air Conditioning
Engineers and the Illuminating Engineering Society of
North America for which the Department of Energy has
issued a final determination and which has been affirmed
by the Secretary, after consultation with the Secretary of
Energy, not later than the date that is 4 years before the
date that such property is placed in service. See
Announcement 2023-1 for the applicable reference
standard.

Building square footage. This is the sum of the floor
areas of the conditioned spaces within the building,
including basements, mezzanine, and
intermediate-floored tiers, and penthouses with headroom
height of 7.5 feet or greater. Building square footage is
measured from the exterior faces of exterior walls or from
the centerline of walls separating buildings, but excludes
covered walkways, open roofed-over areas, porches and
similar spaces, pipe trenches, exterior terraces or steps,
chimneys, roof overhangs, and similar features.

Special Rules

A certification completed by a qualified individual is
required for both building owners and designers to claim
the EECBP deduction. The certification must meet the
requirements specified in Notice 2006-52, Section 4.
A qualified individual is an individual that:
• Is not related to the person or entity claiming the
deduction;
• Is an engineer or contractor that is properly licensed as
a professional engineer or contractor in the jurisdiction in
which the building is located; and
• Has represented in writing that he or she has the
requisite qualifications to provide the certification required
under Notice 2006-52, Section 4, or to perform the
inspection and testing described in Notice 2006-52,
Section 4.05.
An allocation of the EECBP deduction to the designer
of a building owned by a specified tax-exempt entity must
be in writing and meet the requirements of Notice
2008-40, Section 3.04, in order for the designer to claim
the deduction.
Increased deduction amount. Taxpayers that satisfy
the prevailing wage and apprenticeship requirements with
respect to an installation of EEP (or property installed
2

You must maintain and preserve sufficient
records, including books of account or records for
CAUTION work performed by laborers to install the property,
to establish that you satisfied the prevailing wage and
apprenticeship requirements to claim the increased tax
benefit.

!

See the instructions for Line 1, Column (d). For more
information on the prevailing wage and apprenticeship
requirements, see Notice 2022-61, 2022-52 I.R.B. 560,
available at IRS.gov/irb/2022-52_IRB#NOT-2022-61.

Specific Instructions
Note. If claiming the EECBP deduction for more than four
properties, complete and attach as many Forms 7205 as
needed to list them. However, complete Part II, line 3 (for
total section 179D deduction) on only one Form 7205. The
line 3 amount on that form should include the combined
total for all properties reported on all Forms 7205. See the
instructions for Part II, line 3.

Who Is Claiming the Deduction

At the top of Form 7205, check the status that applies to
the person claiming the deduction. Check only one
status.
Instructions for Form 7205 (Rev. December 2023)

Building Owner. Check the “Building owner” box if you
are the owner of the building and are claiming the
deduction for qualifying property installed on or in your
building.
Designer of energy efficient property (EEP). If EEP is
installed on or in property owned by a specified
tax-exempt entity, the deduction may be allocated to the
person primarily responsible for designing the property in
lieu of the owner of such property. Check the “Designer”
box if all the following are true.
• You are the person primarily responsible for designing
the EEP (the designer).
• You created the technical specifications for installation
of the EEP on or in property owned by the specified
tax-exempt entity. A person that merely installs, repairs, or
maintains the property is not a designer.
• The specified tax-exempt entity building owner provided
you a written statement allocating the deduction to you.

building, enter the EECBP information on a separate line.
For example, enter EEBRP information for Building 1 on
line 1A and EECBP information for Building 1 on line 1B.

Line 1, Column (f)

Use the Worksheet for Form 7205, Line 1, Column (f), to
compute the total potential amount per square foot. Each
building has a maximum amount per square footage limit
for the 3 tax years immediately preceding the current tax
year. For a building where the deduction is appropriately
allowable to a person other than the building owner, the
building's maximum amount for square footage limit
applies to the 4-tax-year period immediately preceding the
current tax year. Once the limit is reached, no further
section 179D deductions may be taken for the building
during the applicable period. See the instructions for
line 2, column (b), later, for the maximum amount allowed.

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Part I—Building and EEP Information

Line 1, Column (g)

Enter the building square footage for the property. See the
definition of building square footage, earlier.

Line 1, Column (a)

Enter the name, street address, city or town, state, and
ZIP code of building(s) on or in which the EEP is installed.
Keep buildings separated on lines A, B, C, and D.

Part II—Computation of Energy
Efficient Commercial Buildings
Deduction Amount

Line 1, Column (b)

Line 2, Column (a)

Enter the date the property was placed in service.

Line 1, Column (c)

Enter the appropriate percentage (rounded to two decimal
places):
• Energy savings percentage for the applicable
building systems, computed using the Performance Rating
Method (PRM), as specified in Notice 2006-52; or
• Energy use intensity (EUI) reduction for a building on
or in which EEBRP is installed expressed as energy per
square foot per year. EUI is calculated by dividing the total
energy consumed by the building in one year (measured
in kBtu) by the building square footage.

Line 1, Column (d)

Check the box in column 1(d) only if the following criteria
for the increased deduction amount are met:
• Installation of EEP (or property installed pursuant to a
qualified retrofit plan) began prior to January 29, 2023, or
• Laborers and mechanics employed by the taxpayer or
any contractor or subcontractor in the installation of EEP
(or property installed pursuant to a qualified retrofit plan)
are paid wages at rates not less than the prevailing rates
for construction, alteration, or repair of a similar character
in the locality in which such EEP is located as most
recently determined by the Secretary of Labor, and
• Any applicable apprenticeship requirements are met.

Enter the total per square foot dollar amount that was
claimed for the building in the prior 3 (or 4, if applicable)
tax years. The total amount for the building includes the
amount you claimed, and amounts claimed by others,
including previous owners of the building.
1. Enter the total deduction for the building claimed
in the prior 3 tax years* by you and/or any other
parties . . . . . . . . . . . . . . . . . . . . . . . . .
2. Enter the amount from Form 7205, line 1,
column (g) for the building . . . . . . . . . . . . .
3. Divide line 1 by line 2. Enter this amount on Form
7205, line 2, column (a) . . . . . . . . . . . . . . .
*Use a 4-tax-year period if the deduction is
allowable to the designer.

1.
2.
3.

Line 2, Column (b)

Subtract line 2, column (a), from the maximum full amount
allowed (from the chart below) for the tax year.
The maximum amount allowed each year is as follows:

For more information regarding the prevailing wages
and apprenticeship requirements, see Notice 2022-61.
Also see Increased deduction amount, earlier.

Line 1, Column (e)

Check the box in column 1(e) only if EEBRP was installed
on or in the building under a qualified retrofit plan. If both
EECBP and EEBRP were installed on or in the same
Instructions for Form 7205 (Rev. December 2023)

3

Tax Year

Maximum Full
Amount Allowed

Maximum Partial
Amount Allowed

All years beginning
before January 1,
2021

$1.80

$0.60

For tax years
beginning on or after
January 1, 2021

$1.82

$0.61

For tax years
beginning on or after
January 1, 2022

$1.88

$0.63

Maximum Amount
Allowed—Line 1(d)
checked

Maximum Amount
Allowed—Line 1(d)
not checked

owners. Only enter your allocated portion of the computed
amount per square foot in column (h). It will generally be
your allocated percentage, as defined in the ownership
agreement, multiplied by the greater of column (d) or
column (f).

Line 2, Column (j)
Designers. If you are claiming the deduction as the
designer of EEP, you may only claim the amount the
specified tax-exempt entity building owner has allocated
to you on the appropriate allocation documents. Enter the
dollar amount allocated to you as designer on line 2,
column (j).

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For property placed in $5.00
service on or after
January 1, 2023

$1.00

Line 2, Column (d)

If line 2, column (c), is checked, enter the amount from
line 1, column (h); skip line 2, columns (e) and (f); and go
to column (g). If line 2, column (c), is not checked, enter
zero on line 2, column (d), and go to line 2, column (e).

Line 2, Column (g)

Enter the cost of EEP placed in service during the tax
year. The cost of EEP does not include the total cost of the
building or general renovation. It is limited to the cost of
the building systems that make up the EEP. See the
definition of EEP, earlier. EEP does not include property
such as ovens and fryers, manufacturing equipment,
elevators or escalators, or exterior lighting.
If you are a building owner with a partial building
ownership, refer to your ownership or lease agreement to
determine how the expense is to be allocated among the
owners. Only enter your allocated portion of the cost of
EEP placed in service during the year.

Line 2, Column (h)

In column (h), enter the greater of column (d) or column
(f). If you are a building owner with a partial building
ownership, refer to your ownership or lease agreement to
determine how the amount should be allocated among the

Line 3. Total Section 179D Deduction

Add the amounts in line 2, column (k). Enter the total on
line 3. Also include the total on the applicable line of your
tax return. For example, if filing Form 1120, include the
total on line 25. Attach Form 7205. See the instructions for
your tax return.
If you are claiming the deduction for more than 4
properties, complete as many Forms 7205 as needed to
list them. However, complete line 3 on only one form. That
line 3 amount should include the combined total of all
properties reported on all Forms 7205.

Part III—Certification Information for
Each Property Listed in Part I

Enter the information regarding the qualified individual
who completed the certification for each claimed property.
See qualified individual, earlier.

Part IV—Designer Allocation
Information for Each Property Listed
in Part I

Complete this section only if you checked the designer
box at the top of the Form 7205.
Enter the information regarding the specified
tax-exempt entity building owner and the individual
completing the allocation form.

Worksheet for Form 7205, Line 1, Column (f) (Complete for each
building)
1.
2a.
2b.
2c.
3.

4

Keep for Your Records

Enter the percentage from Part I, line 1(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If the percentage is less than 25%, STOP; you cannot claim the deduction for this building.
If the percentage is 25% or greater, enter the percentage as a decimal, rounded to two
decimal places (e.g. 26.22% enter as “0.26”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multiply line 2a by $2.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If the amount on line 2b is greater than $1.00, enter $1.00. Otherwise, enter the amount
from line 2b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If the box on Form 7205, line 1, column (d), is checked, multiply the amount on line 2c of
this worksheet by 5 and enter the result here on line 3.
If the box on Form 7205, line 1, column (d), is not checked, enter the amount from line 2c of
this worksheet here on line 3. Also enter the amount from line 3 on Form 7205, line 1,
column (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

2a.
2b.
2c.

3.

Instructions for Form 7205 (Rev. December 2023)

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the
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The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden
for all other taxpayers who file this form is shown below.
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 min.
Preparing, copying, assembling, and sending the form to the IRS . . 10 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,
we would be happy to hear from you. You can send us comments from IRS.gov/FormComments. Or you can write to the
Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.

Instructions for Form 7205 (Rev. December 2023)

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