Unlocking Savings with the 179D Energy Efficient Tax Deduction

When it comes to running a successful self-storage business, every dollar counts. Rising energy costs and increased demand for climate-controlled storage mean owners are constantly looking for ways to cut expenses while improving facility performance. One often-overlooked opportunity is the 179D Energy Efficient Commercial Building Deduction—a powerful tax incentive designed to reward building owners and designers who invest in energy efficiency.

What is the 179D Deduction?

The 179D deduction allows qualifying building owners to claim a tax deduction of up to $5 per square foot for meeting certain energy efficiency standards, as outlined by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE).

The deduction covers three major areas of a facility:

• Building Envelope – insulation, roofing, windows, and doors that help reduce energy loss.

• HVAC and Hot Water Systems – efficient heating, cooling, ventilation, and water heating systems.

• Lighting Systems – energy-saving lighting, such as LED upgrades.

Why This Matters for Self-Storage Owners

Self-storage facilities—especially climate-controlled buildings—are excellent candidates for this deduction. These properties require significant energy use to regulate temperature and humidity, making efficiency upgrades both cost-saving and tax-advantageous.

Key Benefits:

1. Significant Tax Savings
For example, a 50,000-square-foot climate-controlled facility that meets the standards could qualify for up to $250,000 in deductions. That’s real money back into your business.

2. Lower Operating Costs
Energy-efficient HVAC units, LED lighting, and improved insulation mean lower monthly utility bills. Since storage facilities often operate 24/7, these savings compound quickly.

3. Increased Market Appeal
Today’s customers care about sustainability. Highlighting your facility’s efficiency not only improves your brand image but also helps attract tenants who value environmentally conscious businesses.

4. Protection Against Rising Energy Prices
With energy costs on the rise, investing in efficiency now creates long-term stability in operating expenses.

5. Support for Sustainability Goals
Upgrading your facility helps position your business ahead of future energy regulations while reducing environmental impact.

What Owners Should Know

• Certification is Required: A licensed third-party professional must certify your facility’s efficiency improvements.

• Partial Deductions Are Possible: Even if your building doesn’t fully qualify, improvements to specific areas (like HVAC or lighting) can still earn partial deductions.

• Retrofits Count Too: The 179D deduction applies not only to new construction but also to upgrades and renovations of existing self-storage facilities.

The Bottom Line

For Alabama self-storage operators, the 179D Energy Efficient Tax Deduction represents a strategic way to cut costs, improve profitability, and future-proof your facilities. By investing in energy efficiency today, you not only enjoy tax savings and lower operating expenses but also position your business as a leader in sustainable storage solutions.

As always, be sure to consult with your CPA or tax attorney to understand how this deduction fits into your overall financial strategy.