Beyond the Return: How CPAs Can Add Significant Value for Commercial Real Estate (CRE) Clients Through Tax Incentives and Strategies

Your real estate clients are making significant capital investments in real property. Opportunities such as cost segregation, the Section 179D deduction, and the Section 48E Investment Tax Credit (ITC) can significantly reduce the tax burden of those investments, but only if they are identified and implemented at the right time. As their CPA, you are often in the best position to identify when these opportunities exist.

While the underlying engineering analyses and technical certifications are performed by specialized professionals, the evaluation, coordination, and integration of these incentives into the client’s overall tax strategy remain critical advisory functions of the CPA. This guide explains how those roles work together to help clients capture the greatest benefit.

Cost Segregation

Cost segregation is an engineering-based study that reclassifies building components into shorter depreciable lives, like 5, 7, or 15 years, rather than the standard 39-year life for commercial property. The result is accelerated deductions that reduce taxable income in the near term rather than over decades.

For clients who acquired property in prior years and never completed a cost segregation study, the opportunity to accelerate depreciation does not disappear. Because reclassifying assets for depreciation purposes constitutes a change in accounting method, the appropriate remedy is generally to file Form 3115, Application for Change in Accounting Method, rather than amend prior-year tax returns.

Form 3115 enables the client to make a one-time Section 481(a) adjustment for depreciation deductions that were allowable in prior years but not claimed. Rather than revisiting prior returns, the client can recognize the cumulative missed depreciation in the year the Form 3115 is filed. This catch-up deduction can produce a significant reduction in taxable income and generate a meaningful current-year tax benefit.

Important Planning Opportunity — One Big Beautiful Bill Act (OBBBA) Changes

Under the OBBBA, bonus depreciation has been permanently restored to 100%. As a result, for qualifying property acquired and placed in service after January 19, 2025, any assets reclassified through a cost segregation study into 5-, 7-, or 15-year recovery periods may be fully deducted in the first year rather than depreciated over their respective recovery lives.

This significantly increases the value of a cost segregation study by accelerating deductions and improving near-term cash flow. Because a typical study may identify approximately 10% to 25% of a property’s depreciable basis as short-life property, the resulting first-year deduction can be substantial, often generating a meaningful tax savings and cash flow benefit for the client.

Section 179D — Energy Efficient Commercial Buildings Deduction

Section 179D provides a federal tax deduction for qualifying energy-efficient building systems for interior lighting, HVAC and hot water systems, and the building envelope. The deduction is calculated on a per-square-foot basis, with a maximum up to $5.00 per-square-foot for projects meeting federal labor compliance requirements, with the exact inflation-adjusted maximum published annually by the IRS.

The deduction can be claimed more than once on the same property, but only when new qualifying energy improvements are made. It’s worth revisiting Section 179D with clients who have ongoing renovation or construction activity.

Certification is required for Section 179D deductions and must include procedures for inspection and testing by qualified individuals to ensure compliance. The qualified individual generally must be unrelated to the taxpayer claiming the deduction, properly licensed as a professional engineer or contractor in the jurisdiction where the building is located, and recognized by an IRS-certified organization. The taxpayer is not required to attach the certification to the return but should retain it in its records

Important planning note — OBBBA termination date: Under the OBBBA, the Section 179D deduction is unavailable for property whose construction begins after June 30, 2026. This change is prospective and is based on the project’s construction-start date; projects that begin construction before July 1, 2026 are not disqualified by the new termination rule, but must still satisfy the normal Section 179D requirements. For clients planning new construction or major retrofits, the cutoff is an important timing consideration when evaluating project schedules. Building owners that missed prior Section 179D deductions generally may pursue the deduction through accounting method change procedures, including Form 3115, rather than treating the issue as an unrestricted retroactive claim. By contrast, designers or other allocable deduction recipients are not eligible for that Form 3115 route and generally must rely on normal amended-return or refund-claim timing rules. Designers also must obtain and retain a written allocation of the deduction from the applicable building owner.

Opportunity for Tax-Exempt Entities: When energy efficient commercial building property is installed on or in a building owned by a specified tax-exempt entity, the building owner generally cannot use the Section 179D deduction directly; instead, the deduction may be allocated “in lieu of the owner” to the person primarily responsible for designing the property, who is treated as the taxpayer for purposes of Section 179D. For CPAs serving eligible designers such as architects, engineers, design-build contractors, environmental consultants, or energy services providers that create the technical specifications for installation, this allocation opportunity is a frequently overlooked planning point. By contrast, a person that merely installs, repairs, or maintains the property generally is not a “designer” for allocation purposes.

Section 48E — The Clean Electricity Investment Tax Credit (ITC)

Section 48E provides a federal clean electricity investment credit for qualified investment in zero-emissions electricity-generation facilities and energy storage technology, including technologies such as solar, wind, geothermal, nuclear, hydropower, marine and hydrokinetic, and certain waste energy recovery property. IRC §48E applies to qualified facilities placed in service after December 31, 2024, with an anticipated greenhouse gas emissions rate of not greater than zero.

The ITC generally starts at a base rate of 6% of the qualified investment. The rate increases to 30% if the project satisfies the prevailing wage and apprenticeship requirements, qualifies under the one-megawatt exception, or began construction before January 29, 2023. Additional increases may be available for domestic content, energy community property, and certain low-income or Tribal community allocations.

Tax-exempt entities and elective pay (direct pay): Qualifying tax-exempt and governmental entities may elect elective pay for the ITC beginning in 2025, allowing the credit to be treated as a direct payment rather than a traditional income tax credit. A pre-filing registration with the IRS is required before claiming elective pay.

Transferability: Eligible taxpayers, partnerships, and S corporations can elect to transfer all or part of the ITC to an unrelated taxpayer in exchange for cash. This can be useful where the taxpayer’s current tax position limits its ability to fully use the credit. A pre-filing registration with the IRS is also required before a transfer election can be made.

OBBBA termination for wind and solar: The ITC for wind and solar facilities is terminated for qualified property placed in service after December 31, 2027, if construction begins after July 4, 2026. Energy storage technology placed in service at a wind or solar facility and other qualifying technologies are not subject to this termination under current law.

Which Clients Are the Best Candidates for These Opportunities?

A practical first step is a review of your existing client base. Use the checklist below to identify clients who may qualify for one or more of these incentives and flag them for a specialist conversation.

Commercial Property Owners

□ Owns or has acquired commercial real estate (office, retail, hotel, warehouse, industrial) with a depreciable basis of $1M or more
□ Has completed new construction or significant renovation in any prior year without a cost seg study
□ Has an acquisition, new construction, or renovation project planned or underway
□ Has installed or is planning to install energy-efficient lighting, HVAC, or building envelope improvements
□ Has installed or is planning to install clean energy systems (solar, energy storage, geothermal, wind)

Residential Income-Producing Property Owners

□ Owns qualifying apartment complexes, multi-family developments, or short-term rental portfolios with a depreciable basis of $1M or more
□ Has never completed a cost seg study on a qualifying residential rental property
□ Has installed or is planning to install solar on-site (roof or ground-mounted solar PV, solar carports or canopies) or battery/thermal energy storage (demand charge management or backup power systems)

Non-Profit and Tax-Exempt Clients (Including Government Entities)

□ Has installed or is planning to invest in clean energy systems like solar PV
□ Clients who are architects, engineers, or design-build contractors working on government or non-profit buildings

Clients with Prior-Year Properties and No Cost Seg Study

□ Owns commercial or qualifying residential income-producing property placed in service in any prior year without a cost seg study

The Planning Calendar: Key Milestones and Timing

Timing is the most common source of missed opportunities with these incentives. Here’s a milestone-by-milestone schedule for staying ahead of your real estate clients’ project timelines.

Before Construction Begins

Engage a tax incentives specialist before contracts with the general contractor (GC) and subcontractors are signed. Documentation requirements for the ITC and Section 179D deduction need to be built into those agreements from day one to help maximize the value of these incentives.
Confirm which ITC tier the client is pursuing (base rate vs. higher rate with labor compliance or location specifics). This determines whether prevailing wage and apprenticeship or domestic content tracking is required throughout construction.
Line up the Section 179D certifier, a licensed engineer or contractor unrelated to the taxpayer, so they can track the project as it’s built rather than reconstruct it afterward.

During Construction

Monitor prevailing wage and apprenticeship compliance if the client is pursuing the higher ITC or Section 179D deduction rate. Shortfalls can sometimes be corrected mid-project but become harder (and more costly via penalties) to address after completion.
Encourage your client to work with their GC to preserve construction-era records like pay applications, change orders, and detailed blueprints.
Coordinate with the Section 179D certifier to ensure energy system documentation is captured in real time.

At Placed-in-Service

The ITC is claimed in the tax year the clean energy facility is placed in service. Same applies for the Section 179D deduction. Confirm the placed-in-service date with the client so tax planning can be done with the most accurate information available. The benefit doesn’t have to wait until the return is filed if you and your client are proactive.
Begin the cost seg study engagement. The specialist will need access to final construction documentation.

Post-Placed-in-Service and Ongoing

Review client depreciation schedules for property placed in service in earlier years. 39- and 27.5-year assets with basis greater than $1M are the best candidates. A cost seg analysis can identify missed depreciation which can be claimed on the current year return to claim the benefits.
Integrate the cost seg study results, Section 179D deduction, and ITC into the client’s overall return and tax strategy.
Flag the property for Section 179D re-evaluation when the client plans future energy improvements. New qualifying improvements may open the door to a new Section 179D claim.

What to Look for in a Specialist Partner

The quality of a cost seg study, Section 179D certification, or ITC documentation package varies significantly by provider. When evaluating a specialist for client referral, here’s what matters:

Construction and engineering credentials and tax expertise. The IRS’s Cost Segregation Audit Techniques Guide notes that a study by a construction engineer is generally more reliable than one conducted by someone without an engineering or construction background. The industry is also highly governed by tax law which requires specialized tax personnel review.
Audit-ready documentation and audit defense. A quality specialist produces documentation that can withstand IRS scrutiny and includes audit defense as part of the engagement, not as an add-on.
Fee transparency before engagement. The projected benefit and fee should be clearly disclosed upfront so your client can evaluate the return on investment before committing.
Ability to handle all three incentives. A specialist who covers cost seg, Section 179D, and ITC under one roof eliminates the coordination friction of managing multiple vendors and ensures the sequencing of the three incentives are handled correctly.
Respect for the CPA relationship. A good specialist partner delivers their work to you and your client without disrupting the advisory relationship you’ve built. Their job is the technical study. Your job is the strategy.

How the CPA and CTI Partnership Works

CTI’s role is to provide the technical expertise, including engineering-based cost segregation studies, Section 179D certifications, ITC documentation support, and audit-ready substantiation. The resulting deliverables are then incorporated by the CPA into the client’s tax return and broader tax planning strategy.

You do not need to become a cost segregation or energy incentive expert. At the same time, CTI works most effectively when we have a clear understanding of the client’s overall tax and financial circumstances. Factors such as taxable income, ownership structure, passive activity limitations, prior elections, and future planning objectives can significantly impact the value and implementation of these strategies. By combining your knowledge of the client with CTI’s technical expertise, we can help ensure the opportunity is both beneficial and properly executed.

The process is designed to be collaborative and efficient. CTI delivers the technical analysis, certifications, and supporting documentation, while you maintain control of the tax return, client relationship, and overall advisory strategy.

What CTI asks is to be involved early, ideally before construction begins and certainly before a project is completed. Earlier engagement typically allows for greater tax benefits to be captured, reduces the need to reconstruct documentation after the fact, and helps identify planning opportunities that may otherwise be missed.

The Bottom Line

Together, cost segregation, the Section 179D deduction, and the ITC represent a meaningful planning opportunity for your real estate clients.

The technical work belongs to the specialist. The client relationship, the strategic oversight, and the integration into the overall tax picture belong to you. When both roles are filled by the right people at the right time, the result is a client who captures everything they’re entitled to and an advisor who made that happen.

Ready to explore what’s available for your clients? Contact CTI to discuss your client roster and find out where the opportunities are.