What is Form 7205

Form 7205, Energy Efficient Commercial Buildings Deduction, is used to claim a tax deduction for qualifying energy-efficient commercial building property (EECBP) placed in service during the tax year.

The form is used to calculate and report the deduction available under Internal Revenue Code Section 179D. This deduction is designed to encourage the installation of energy-efficient systems and improvements in commercial buildings.

Who Should File Form 7205?

You may need to file Form 7205 if you are:
  • The owner of a qualifying commercial building that includes energy-efficient property placed in service during the tax year, or
  • The designer of qualifying energy-efficient commercial building property installed in a building owned by a specified tax-exempt entity and allocated to you under the Section 179D rules.
Form 7205 must be attached to your tax return to claim the deduction.

Who Qualifies for the Deduction?

For property placed in service after January 1, 2023, the deduction may be available to:
  • Owners of qualifying commercial buildings, or
  • Designers of energy-efficient commercial building property installed in buildings owned by specified tax-exempt entities, such as certain government, tribal, educational, or nonprofit organizations.
Meeting the eligibility requirements does not automatically qualify you for the deduction. The property must also satisfy the energy-efficiency standards and certification requirements described below.

Does My Property Qualify as an Energy Efficient Commercial Building?

To qualify as energy-efficient commercial building property (EECBP), the property generally must meet all of the following requirements:
  • The property must be depreciable.
  • The property must be located within the United States.
  • The property must be installed as part of one or more of the following building systems:
    • Interior lighting systems
    • Heating systems
    • Cooling systems
    • Ventilation systems
    • Hot water systems
    • The building envelope (such as walls, roofs, windows, and doors)
  • The property must be certified as part of a plan designed to reduce annual energy and power costs compared to a reference building that meets the minimum standards established by the applicable energy-efficiency guidelines.
Because the technical requirements can be complex, many taxpayers work with engineers, architects, contractors, or energy consultants to determine whether the property qualifies.

Is Certification Required?

Yes. A certification is generally required before a building owner or designer can claim the Section 179D deduction.

The certification must be completed by a qualified individual and must verify that the property satisfies the applicable energy-efficiency requirements. The certification must also meet the standards prescribed by the IRS for energy-efficient commercial building deductions.

You can review the requirements specified in Notice 2006-52, Section 4.

Keep a copy of the certification and all supporting documentation with your tax records. You do not typically submit the certification with your return, but you should retain it in case the IRS requests additional information.

Program Pathway

  • Select Federal
  • Income - Select My Forms
  • Profit or Loss from Business (Schedule C), Profit or Loss from Farming (Schedule F), or Profit or Loss from Rentals and Royalties (Schedule E)
  • Energy Efficient Commercial Buildings Deduction, Form 7205

What Information Do I Need to Complete Form 7205?

Before preparing Form 7205, you should gather:
  • Documentation describing the energy-efficient improvements
  • The date the property was placed in service
  • Cost and depreciation information for the property
  • Any allocation statement, if you are a designer claiming a deduction from a specified tax-exempt entity
  • The required energy-efficiency certification and supporting calculations
Having these records available can help ensure the deduction is calculated correctly and reduce delays if additional documentation is needed later.  
Looking for more tax information and tips? SHOW ME MORE
Was this article helpful?
3 out of 7 found this helpful
While TaxSlayer strives to make the information and links contained in our KB articles as timely and accurate as possible, we make no promise or guarantee about the timeliness, accuracy, or completeness of the contents on these pages. The information contained in the Knowledgebase (KB) is for general information only and is not intended to be tax, financial, or legal advice. The user is encouraged to review additional state and federal resources and publications as needed.

Switching to TaxSlayer is easy

Simply upload your return from whatever service you used last year
START FOR FREE

Related articles