What Happened to the Section 179D Commercial Building Deduction
Section 179D rewarded owners and designers of energy-efficient commercial buildings with a tax deduction. The One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025, ended it for property whose construction begins after June 30, 2026. This page used to be a guide to claiming the deduction. It now covers what it was, what changed, who can still claim it, and what is available instead.
Status as of September 10, 2026: terminated for property whose construction begins after June 30, 2026. Source: IRS Fact Sheet FS-2025-05.
What Section 179D Was
Section 179D allowed a deduction for energy-efficient commercial building property: interior lighting, HVAC and hot water systems, and the building envelope. The deduction was calculated per square foot on a sliding scale tied to the energy savings achieved against an ASHRAE 90.1 reference building, with a higher rate for projects that met prevailing wage and apprenticeship requirements.
The Inflation Reduction Act increased the deduction starting in 2023 and extended the designer allocation, which had let the owner of a government building allocate the deduction to the building's designer, to tribal and other tax-exempt owners. It applied to:
- Commercial buildings (office, retail, industrial, warehouse, hotel, hospital)
- Residential rental buildings of 4 or more stories
- Government-owned buildings (federal, state, local, territory)
- Buildings owned by tax-exempt organizations (nonprofits, hospitals, universities, churches)
- Buildings owned by Indian tribal governments
What the One Big Beautiful Bill Act Changed
The One Big Beautiful Bill Act added a termination date. In the IRS's words, “The deduction will not be allowed with respect to any property the construction of which begins after June 30, 2026.” The date that matters is when construction begins, not when the building is finished.
Section 179D is a deduction, not a credit. It is worth the deduction amount times the owner's marginal tax rate, not dollar for dollar. It cannot be sold under Section 6418 and is not eligible for Section 6417 direct pay.
Who Can Still Claim It
A project whose construction began on or before June 30, 2026 can still claim the deduction in the tax year the property is placed in service. For those projects:
- The energy savings still have to be certified by a qualified, independent engineer or contractor using approved energy modeling software
- Private owners claim the deduction directly
- For government, tribal and nonprofit buildings, the owner can still allocate the deduction to the designer through a written allocation it signs
The IRS has not issued beginning-of-construction guidance specific to Section 179D. Do not assume a safe harbor written for another credit applies. Document when physical work on the building began, and confirm the start date with a tax advisor before claiming.
What Is Available Instead
The One Big Beautiful Bill Act changed federal tax law only. New York state, New York City and utility programs are not affected by it. IncentEdge's verified catalog currently covers New York: state agency programs, New York City programs, and utility programs, plus federal credits that apply nationwide.
At the federal level, the Section 48E investment tax credit for solar and storage remains: 30% of eligible cost for a system under 1 MW AC or one with prevailing wage and apprenticeship compliance, 6% for a larger system without it. Wind and solar projects must have begun construction by July 4, 2026, or be placed in service by December 31, 2027. Energy storage keeps a longer phase-down schedule.
See the programs on the New York incentives page, or browse all incentives.
Frequently Asked Questions
Is the Section 179D deduction still available?
Only for property whose construction began on or before June 30, 2026. The One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025, ended the deduction for any property the construction of which begins after that date. A project that began construction on or before June 30, 2026 can still claim the deduction in the year it is placed in service.
How do I show that construction began by June 30, 2026?
The IRS has not issued beginning-of-construction guidance specific to Section 179D, so do not assume a safe harbor written for another credit applies. Keep records of when physical work on the building began, and confirm the start date with a tax advisor before claiming.
Is Section 179D a tax credit?
No. Section 179D is a deduction, so its value to the owner is the deduction amount times the owner's marginal tax rate, not a dollar-for-dollar reduction in tax. It cannot be transferred under Section 6418 and is not eligible for Section 6417 direct pay.
Who claims 179D for government and nonprofit buildings?
For buildings owned by government entities, Indian tribal governments and other tax-exempt organizations, the owner can allocate the deduction to the architect, engineer or contractor who designed the energy-efficient property, through a written allocation signed by the owner. That route applies only to property that still qualifies, meaning its construction began on or before June 30, 2026.
What is available instead of Section 179D?
The One Big Beautiful Bill Act changed federal tax law only. New York state, New York City and utility programs are not affected by it, and IncentEdge's verified catalog covers them. At the federal level, the Section 48E investment tax credit for solar and storage remains, but wind and solar projects must have begun construction by July 4, 2026, or be placed in service by December 31, 2027.
See what is available in New York
New York state, New York City and utility programs were not affected by the One Big Beautiful Bill Act. IncentEdge's verified catalog covers them, plus federal credits.