The One Big Beautiful Bill Act, signed into law on July 4, 2025, resulted in a number of taxpayer-friendly provisions but also came with early sunsets to many of the Inflation Reduction Act clean energy tax incentives, including 179D, the Energy-efficient Commercial Buildings Deduction, which now terminates for property whose construction begins after June 30, 2026.
179D: What it covers and how the deduction is calculated
The 179D deduction is a federal tax deduction for property installed as part of new construction, renovation or expansion in energy efficiency. This applies specifically to interior lighting systems, HVAC systems, hot water systems and the building envelope that result in energy savings of 25 to 50% under ASHRAE Standard 90.1. In 2025, the base deduction rate is $0.58 – $1.16 per square foot. When prevailing wage and apprenticeship requirements are met, the rate increases to $2.90 – $5.81 per square foot.
Who can benefit from 179D and how to plan for the June 30, 2026 deadline
This deduction isn’t just for the owners of the property; contractors, engineers, architects and other designers can also benefit when working with government or tax-exempt entities. Under certain criteria, the government or tax-exempt owner is allowed to allocate the deduction to the designer instead of claiming it themselves.
As the accelerated sunset of 179D approaches, taxpayers, designers and contractors still have a valuable – though narrowing – window to capitalize on one of the most impactful energy-efficiency incentives available. With substantial per-square-foot deductions and the ability for designers of government and tax-exempt projects to receive allocated benefits, 179D remains a powerful tool for reducing tax liability and supporting high-performance building design. The new June 30, 2026, construction-start deadline, however, makes proactive planning essential. Stakeholders should assess upcoming projects now, confirm qualification requirements, and coordinate with tax and energy professionals to ensure they can secure the deduction before it expires.
About Schneider Downs Tax Services
Schneider Downs’ tax advisors have experience and expertise in a wide range of industries, including Automotive, Construction, Real Estate, Manufacturing, Energy & Resources, Higher Education, Not-for-profits, Transportation and others. Our industry knowledge and focus ensure the delivery of technical tax strategies that can be implemented as practical business initiatives.
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