Where the law stands right now
The One Big Beautiful Bill Act, signed in July 2025, ended 179D for any property whose construction begins after June 30, 2026. Here is the part most people miss: the cutoff is when construction begins, not when the building is finished. A project that broke ground on June 15, 2026 and gets placed in service in 2028 can still qualify. And projects completed in prior years that met the requirements but were never claimed have not evaporated either.
So the current 179D opportunity is really three groups of people, and you are probably in one of them if you are reading this page.
The three groups who can still claim
1. Owners whose projects broke ground by the deadline
If you own a commercial building and your qualifying construction or retrofit began on or before June 30, 2026, the deduction remains available when the property is placed in service. Documentation of the construction start date now matters enormously. Keep permits, contracts, and site records, and get the certification study lined up early.
2. Designers of government and tax-exempt buildings
Architects, engineers, and design-build contractors can claim 179D for buildings they designed for a government body. For tax years beginning after 2022, the same applies to buildings owned by other tax-exempt groups, such as schools, cities, hospitals, churches, and tribal governments.
A tax-exempt owner has no tax bill, so the deduction would go to waste sitting with them. The law lets that owner hand it to the designer instead, using a signed document called an allocation letter.
If your firm designed public projects that broke ground by the deadline, this may be the biggest deduction your firm has never claimed.
3. Owners and designers with unclaimed prior-year projects
Qualifying work from earlier years can often still be captured. For building owners, missed 179D deductions can generally be caught up through an accounting method change rather than amended returns. Designers work under different procedural rules, which usually means amending returns for open years, so the window is narrower and worth checking sooner rather than later. Either way, the first step is the same. A no-cost review of what you built, when construction began, and what is claimable.
What it is worth
The deduction is computed per square foot and scales with energy performance. Projects meeting prevailing wage and apprenticeship requirements earn the enhanced rate, which for tax years beginning in 2026 runs from $2.97 up to a maximum of $5.94 per square foot. Without prevailing wage and apprenticeship, the range is $0.59 to $1.19. Those figures come from the IRS annual inflation adjustment, Revenue Procedure 2025-32, and they change every year, so a project placed in service in a later year carries a different maximum. Square footage does the heavy lifting. On a 100,000 square foot building at enhanced rates, the deduction can run well into six figures, and large portfolios or repeat designers can reach seven.
Three systems qualify. Interior lighting. Heating, cooling, and hot water. And the building envelope, meaning the walls, roof, windows, and insulation that separate inside from outside.
The work has to cut energy costs by at least 25 percent measured against the ASHRAE reference standard, which is the industry benchmark the IRS points to. An independent professional certifies that using approved energy modeling software. That certification is the study I deliver.
Deadline honesty. If your project had not begun construction by June 30, 2026, I cannot get you 179D, and I will not pretend otherwise. There is no workaround, and anyone who tells you there is one is selling you a problem. What I can do is check whether earlier phases, related projects, or prior-year work qualify, and whether other incentives fit your situation.
What a 179D study actually involves
A 179D study is the certification the IRS requires before anyone can take the deduction. No certification, no deduction. Your CPA claims it on Form 7205, but the study is what stands behind the number. Here is what goes into one.
An independent, licensed engineer
The certification has to come from an engineer or contractor properly licensed as a professional engineer in the state where the building sits, and that person cannot be related to the taxpayer claiming the deduction. That rule is in IRS Notice 2006-52, section 5.05. Independence is the point. The person signing has nothing riding on the answer.
Energy modeling with approved software
The engineer models the building's projected energy use and costs and compares them to the reference standard. The software has to be on the Department of Energy's published list at the time the certification is given (Notice 2006-52, section 5.04). The model is what proves the 25 percent reduction, system by system.
An in-person inspection after the building is in service
The certification must state that a qualified individual performed field inspections of the building after the property was placed in service, following procedures prescribed by the National Renewable Energy Laboratory (Notice 2006-52, section 4.05). A trained professional walks the building. The lights, the HVAC equipment, and the envelope have to match what the model assumed.
The signed certification
The finished document identifies the engineer and the building, names the software used, confirms the field inspection, and states that the owner received an explanation of the building's energy efficient features and projected annual energy costs (Notice 2006-52, section 4.06). That is the file you keep if the IRS ever asks.
For designers, the allocation letter
When the building belongs to a government or tax-exempt owner, the study also includes the owner's written allocation naming your firm, which has to meet the requirements of Notice 2008-40, section 3.04. I chase that signature as part of the job.
Questions owners and designers actually ask
What is a 179D study?
It is the independent certification the IRS requires before you can claim 179D. A licensed engineer who is not related to you models the building's energy use with Department of Energy approved software, inspects the building in person after it is placed in service, and signs a certification that it beats the reference standard by the required margin.
Is 179D still available in 2026?
Yes, for projects that began construction on or before June 30, 2026, and for eligible unclaimed prior-year work. It is terminated for projects breaking ground after that date.
My building will not be finished until 2027 or later. Do I lose the deduction?
No. The termination is keyed to construction start, not completion. If you broke ground in time, the deduction is claimed when the property is placed in service, even in a later year.
I am an architect. How does the allocation letter work?
The building owner signs a short document naming your firm as the one who gets the deduction for the systems you designed. That document is the allocation letter.
Chase these letters early. People move on, records get boxed up, and the person who ran the project may be gone in two years. Getting the letter signed is the most time-sensitive part of the whole job, and I handle it as part of the study.
What documentation do I need to prove my construction start date?
Permits, executed construction contracts, and records of physical work on site are the core evidence. If you are unsure whether your records establish the date, bring them to the no-cost review and we will assess them before anything else.
Hear it explained
Find out where you stand
Bring the project; I will bring the answer. A no-cost review tells you whether your construction dates and systems qualify, what the deduction is worth, and whether it is worth pursuing. No obligation, and if the answer is no, you will hear it plainly.