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Tax Credits

179D Deduction in 2026: Who Can Still Claim It?

179D doesn't apply to property whose construction began after June 30, 2026. Who can still claim it, the 2026 limits, certification and Form 7205.

25%For new energy efficient commercial building property, the IRS says it must be certified as installed under a plan to cut the building's total annual energy and power costs for the three systems above by 25% or more, compared with a reference building that meets the minimum requirements of Reference Standard 90.1.
$0.59The Instructions for Form 7205 (revised 12/2025) state: "For tax years beginning in 2026, the maximum deduction is $0.59 per square foot at 25% energy saving increasing at a rate of 2 cents per percentage point increased to $1.19 per square foot at 55% energy savings (indexed for inflation).
$1.19The Instructions for Form 7205 (revised 12/2025) state: "For tax years beginning in 2026, the maximum deduction is $0.59 per square foot at 25% energy saving increasing at a rate of 2 cents per percentage point increased to $1.19 per square foot at 55% energy savings (indexed for inflation).
55%The Instructions for Form 7205 (revised 12/2025) state: "For tax years beginning in 2026, the maximum deduction is $0.59 per square foot at 25% energy saving increasing at a rate of 2 cents per percentage point increased to $1.19 per square foot at 55% energy savings (indexed for inflation).

Only for projects that started construction in time. The IRS says the Section 179D deduction "will not be allowed with respect to any property the construction of which begins after June 30, 2026." The deadline: construction of the property must have begun on or before June 30, 2026. That date has passed, so a project that starts construction now doesn't qualify. Property whose construction began on or before the deadline can still qualify when it's placed in service, and the deduction is claimed on IRS Form 7205.

Last checked: October 25, 2026. This page is general information, not tax, legal, or financial advice.

What is the 179D deduction?

Section 179D of the Internal Revenue Code is a deduction, not a credit, for energy-efficient property installed in commercial buildings. According to the IRS, building owners who place in service energy efficient commercial building property (EECBP) or energy efficient building retrofit property (EEBRP) may be able to claim it. The property has to be part of one of three building systems:

interior lighting systems
heating, cooling, ventilation and hot water systems
the building envelope

The property must be depreciable, installed in a building in the United States, and within the scope of ASHRAE Reference Standard 90.1. The Form 7205 instructions note that the cost of qualifying property doesn't include the total cost of the building or a general renovation, and doesn't include items like ovens and fryers, manufacturing equipment, elevators or escalators, or exterior lighting.

What changed under the One Big Beautiful Bill?

Public Law 119-21, commonly called the One Big Beautiful Bill Act, added an end date. The statute, 26 U.S.C. 179D(i), now reads: "This section shall not apply with respect to property the construction of which begins after June 30, 2026." The IRS repeats that date in two places: its OBBB FAQ; the "What's New" section of the Instructions for Form 7205.

Note the wording: the cutoff turns on when construction of the property begins, not when it's placed in service. A project that began construction on or before June 30, 2026, and is placed in service later may still qualify, if it meets every other requirement. Whether and when construction "began" on a specific project is a question for your tax professional. As of October 25, 2026, the IRS pages we checked don't spell out 179D-specific rules for when construction begins.

Who can still claim it?

Two kinds of taxpayers, per the IRS and the Form 7205 instructions:

Owners of qualified commercial buildings.
Designers of the energy-efficient property, when it's installed in a building owned by a specified tax-exempt entity. These include government entities, Indian tribal governments, Alaska Native corporations and organizations exempt from tax.

A designer can claim the deduction only if they're the person primarily responsible for designing the property, they created its technical specifications, and the tax-exempt building owner gave them a written statement allocating the deduction. The instructions are clear that someone who merely installs, repairs or maintains the property isn't a designer.

Who qualifies

What are the energy-savings requirements?

Certified as installed under a plan to cut the building's total annual energy.
Power costs for the three systems above by 25% or more.
Compared with a reference building that meets the minimum requirements of Reference Standard 90.1.
Have been originally placed in service at least 5 years before the qualified retrofit plan was established.
The energy savings are certified under that plan.
The Form 7205 instructions explain that the retrofit certification can only happen more than a year after the retrofit property is placed in service.
The reference standard can change with timing.
The IRS says that for buildings that began construction on or after January 1, 2023, and have energy-efficient property placed in service on or after January 1, 2027, ASHRAE Standard 90.1-2019 applies.
For buildings that began construction before January 1, 2023, or are placed in service before January 1, 2027, ASHRAE Standard 90.1-2007 applies.

What are the 2026 per-square-foot limits?

The Instructions for Form 7205 (revised 12/2025) state: "For tax years beginning in 2026, the maximum deduction is $0.59 per square foot at 25% energy saving increasing at a rate of 2 cents per percentage point increased to $1.19 per square foot at 55% energy savings (indexed for inflation)."

The same instructions list $5.94 per square foot as the 2026 maximum when the prevailing wage and apprenticeship box is checked, and $1.19 when it isn't. Projects meeting local prevailing wage and apprenticeship requirements multiply the applicable dollar values by 5 (before inflation adjustments). The deduction is the lesser of the cost of the installed property or the per-square-foot maximum, reduced by 179D amounts claimed for the building in the prior 3 tax years (4 years for an allocated designer deduction).

These are limits, not estimates. What any building can deduct depends on its certified savings, square footage, cost and prior claims.

How does certification work?

Both owners and designers need a certification. For new property, it must come from a qualified individual: an engineer or contractor licensed in the jurisdiction where the building sits, who isn't related to the person claiming the deduction. For retrofit property, it must come from a qualified professional, meaning a licensed architect or licensed engineer. Energy savings are figured using the Performance Rating Method in IRS Notice 2006-52.

How to get it

How do you claim it?

File Form 7205, Energy Efficient Commercial Buildings Deduction, with your return for the tax year the property is placed in service.
The form records the building, the date placed in service, the certified energy-savings percentage, the person who did the certification and, for designers, the allocation from the building owner.
The building owner must also reduce the basis of the property by the amount of the deduction allowed or allocated.

FAQ

Frequently asked questions

Has the 179D deduction ended?

Yes, for new projects. Under 26 U.S.C. 179D(i), the deduction doesn't apply to property whose construction begins after June 30, 2026. Property whose construction began on or before that date can still qualify when it's placed in service.

Can I claim 179D for a project placed in service in 2027?

Possibly, if construction of the property began on or before June 30, 2026, and the project meets every other requirement. For property placed in service on or after January 1, 2027, the IRS says the energy savings are measured against ASHRAE Standard 90.1-2019 for buildings that began construction on or after January 1, 2023. Confirm the construction start with your tax professional.

What is the 179D limit for 2026?

For tax years beginning in 2026, the Form 7205 instructions list $0.59 to $1.19 per square foot, or up to $5.94 per square foot when prevailing wage and apprenticeship requirements are met.

Can an architect or engineer claim 179D?

Yes, if they designed the property for a building owned by a specified tax-exempt entity, such as a government entity or tax-exempt organization, and the owner allocated the deduction to them in writing.

What form do I use to claim 179D?

Form 7205, Energy Efficient Commercial Buildings Deduction, attached to your tax return.

Check what else applies to your building project

A building project can also touch state and local programs, such as property tax abatements or utility efficiency rebates, depending on where you are. Incentive Audit's free audit checks your business against a database of 1,700+ federal and state programs. Answer six quick questions and see your top five program matches with confidence badges, at no cost. No email is required to start. Start at incentiveaudit.com.

Important: FundPlenty isn't a tax, legal or financial advisor, and this page isn't tax, legal or financial advice. Tax rules change, so confirm your eligibility and figures with a qualified tax professional before you claim anything.