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The One Big Beautiful Bill (H.R. 1) modified the previously permanent 179D deduction, creating a termination date for projects that begin construction after June 30, 2026. With less than a year to initiate qualifying projects, CPAs, developers, and architects must act immediately to avoid losing out on energy-efficiency deductions worth up to $5.81 per square foot.
KBKG Insight:
Time is running out. The accelerated sunset of Section 179D creates a compressed window for capturing substantial tax benefits. Projects that begin construction before July 1, 2026, remain eligible—but only if they meet energy performance, wage, and certification criteria.
This means that every delay in planning, design, or documentation could result in forfeiting tens or hundreds of thousands in deductions. We urge commercial building owners, architects, engineers, and tax advisors to enlist a trusted 179D consultant as early in the process as possible. 179D studies should be initiated now to secure outstanding allocation letters and ensure designs meet energy modeling requirements. Once the deadline passes, this decades-old deduction will no longer provide powerful incentives to building owners, architects, and engineers.
Background
Originally made permanent by the Consolidated Appropriations Act, 2021, Section 179D incentivizes energy-efficient upgrades to new and existing commercial buildings by offering deductions for qualifying HVAC, lighting, and envelope systems.
The One Big Beautiful Bill reverses this permanence. As of its enactment, Section 179D will not apply to projects breaking ground after June 30, 2026. Projects under construction or beginning construction ahead of this deadline can still pursue this valuable deduction of up to $5.81 per square foot of building area. That means an architecture firm or engineering firm designing a 200,000 square foot government or nonprofit building could receive over $1,160,000 in deductions depending on the energy efficiency of the building. Commercial building owners can also benefit from current or past construction projects or renovations.
Conclusion
The repeal of 179D for future construction means the clock is ticking for those who want to claim this deduction. The only way to ensure savings is to act quickly on current and future projects. Engage a 179D expert and begin planning now.
Reference:
Read full text of the One Big Beautiful Bill Act
Assess your eligibility and start a 179D Study
About the Authors
Jesse Stanley, P.E. | Principal
Jesse Stanley, P.E. is a Principal and oversees KBKG’s Green Building Tax Incentives, including the 179D Tax Deduction and the 45L Tax Credit. He has spent over a decade helping Architects, Engineers, and Design Build Contractors, claim the 179D Energy Efficient Commercial Building Tax Deductions for their new and existing building projects across over 2 billion square feet of commercial building space… Read More