Section 179D: A New Chapter Begins
The passage of the One Big Beautiful Bill Act (OBBBA) marks a pivotal moment for businesses investing in energy-efficient commercial buildings. Section 179D, a longstanding incentive for qualifying improvements, now faces a scheduled end for projects that begin construction after June 30, 2026—prompting immediate action and careful planning for companies seeking to maximize this benefit.
What Did the OBBBA Change?
- Termination Date Set: The OBBBA ends the Section 179D deduction for qualifying properties where construction begins after June 30, 2026. Projects must break ground before this date to qualify. It is important to note that longstanding safe harbor provisions that have been relied upon in the past to define “Beginning of Construction” are currently under review and likely to be reimagined as part of a recent Executive Order issued by the Trump Administration.
- No Major Structural Changes: The core mechanics of 179D remain unchanged until the deadline. The deduction calculation, eligible property types, and compliance requirements continue as before.
- Broader Clean Energy Cuts: Alongside 179D, other green tax credits such as 45L and certain clean vehicle credits are also being phased out or eliminated.
What Should Businesses Do Now?
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Review and Prioritize Projects
- Identify all planned or potential projects that could qualify for 179D. Prioritize those that can begin construction before July 1, 2026.
- Evaluate energy efficiency upgrades for lighting, HVAC, and building envelope systems to meet or exceed the 25% energy savings threshold.
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Accelerate Timelines
- Fast-track eligible projects to ensure construction starts before the deadline.
- Coordinate with design and engineering teams to optimize for energy efficiency and compliance.
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Document Thoroughly
- Maintain detailed records of project start dates, energy modeling, and compliance with prevailing wage and apprenticeship requirements.
- For prevailing wage guidance, see the IRS prevailing wage FAQ.
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Engage Experts
- Partner with Concord’s team of tax, engineering, and compliance professionals to ensure all documentation is in order and to maximize your deduction. Concord specializes in guiding businesses through the complexities of 179D compliance and energy incentives. Get a free assessment of your projects to determine eligibility and a projection of potential benefits.
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Monitor Legislation
- Stay informed about legislative updates. While the OBBBA sets a clear end date, Congress has extended or revived 179D in the past. For the latest news and insights, follow our updates at Concord News.
What Can Business Owners Do in 2025?
2025 is a critical year for maximizing the benefits of Section 179D before its scheduled phase-out. Here’s how business owners can take action—leveraging Concord’s expertise every step of the way.
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Ensure Eligibility and Optimize Project Design
- Evaluate your projects: Confirm that your planned or ongoing projects can meet the 25% energy savings threshold compared to ASHRAE standards.
- Optimize for savings: Work with Concord’s engineering and compliance specialists to identify upgrades in lighting, HVAC, and building envelope systems that maximize your deduction potential.
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Gather and Maintain Documentation
- Energy modeling reports: Concord’s internal engineering team can assist in generating and reviewing the required energy modeling to certify your project’s compliance.
- Prevailing wage and apprenticeship records: Ensure all labor requirements are met and documented, with guidance from Concord’s compliance team supported by our proprietary Concord Caisson software platform.
- Comprehensive records: Keep all supporting documentation organized for IRS review and future audits.
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File for 179D Deductions
- IRS Form 7205: Prepare and file Form 7205 with your tax return, including all required energy modeling and certification data.
- Certification by qualified professionals: Concord’s internal engineering team complete all required energy modeling and certifications, ensuring IRS compliance.
- Recurring deductions: If you perform qualifying retrofits on the same building, you may be eligible to claim 179D deductions again every three (or four) years. This means that recurring deductions are only available if new, qualifying energy-efficient improvements are made to the same property at the required interval. Concord can help you track when your building may next be eligible based on the timing and scope of your retrofit projects. years.
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Leverage Increased Deduction Limits and Expanded Eligibility
- Maximize your claim: For 2025, base deductions start at $0.58 per square foot (for 25% savings) and can reach $5.81 per square foot when prevailing wage and apprenticeship standards are met.
- Retrofit opportunities: The lower energy savings threshold means more projects qualify. Concord can help you identify and document these opportunities.
Expanded Eligibility: starting in 2023 design firms are able to have the deduction allocated to them by any tax exempt owner including houses of worship, tribal governments, non profits, as well as governmental entities.
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Stack and Strategize Deductions
- Plan for recurring projects: Concord’s experts can help you manage deduction stacking, ensuring expenses deducted in prior years are properly accounted for and you maximize your current claim.
- Allocation for designers: If you are a designer, architect, or engineer working on government, nonprofit, or tribal buildings, we can guide you through the allocation process so you can claim deductions for your qualifying projects.
- Retroactive claims: You may be able to go back and claim the 179D deduction for projects placed in service in prior years by amending your tax returns, provided you meet the eligibility requirements. We can review your past projects and assist with the amendment process.
- Inflation adjustments: Stay updated on inflation-indexed deduction values with our ongoing support.
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Stay Informed and Proactive
Take action in 2025 with Concord as your trusted partner.
Our team will guide you through every step—from project evaluation and documentation to filing and compliance—so you can secure every dollar you’re entitled to before the window closes.
Quick Reference Table: 179D Timeline
| Event |
Date/Deadline |
| Last day to begin construction for 179D eligibility |
June 30, 2026 |
| Enhanced deduction rates for 2025 |
$2.90–$5.81/sf (with wage/apprenticeship) |
| Base deduction rates for 2025 |
$0.58–$1.16/sf |
| Potential for future extension? |
Uncertain, but historically common |
Frequently Asked Questions
Q: What is the exact deadline for 179D eligibility?
A: Projects must begin construction before July 1, 2026, to qualify for the deduction.
Q: What happens if my project starts after June 30, 2026?
A: Projects breaking ground after this date will generally not be eligible for the 179D deduction under current law. However, if your project meets the requirements for the 5% safe harbor—meaning you have signed binding construction contracts and incurred at least 5% of the total project cost prior to July 1, 2026—you may still qualify, even if physical work begins after the deadline.
Q: Can the deadline be extended again?
A: Historically, Congress has extended or retroactively renewed 179D. While there’s always a chance for further extension, businesses should plan as if the deadline will be enforced.
Q: What improvements qualify for 179D?
A: Energy-efficient lighting, HVAC, hot water systems, and building envelope upgrades that meet specified energy savings thresholds. See IRS qualifying property details.
Q: Who benefits from 179D?
A: Commercial building owners, as well as designers, architects, engineers, energy services companies and contractors involved in qualifying energy-efficient projects for tax exempt entities.
Q: What documentation is required?
A: Certified energy modeling, compliance with prevailing wage/apprenticeship standards, and detailed project records. For more, see the IRS 179D certification requirements.
Key Takeaways
- Act Now: The opportunity to leverage 179D is closing. Fast-track eligible projects and ensure all compliance steps are met.
- Maximize 2025 Opportunities: Take advantage of higher deduction rates and expanded eligibility for retrofits. As well as allocation opportunities for designers of tax exempt owned properties
- Seek Guidance: Work with Concord’s experienced advisors to optimize your tax position and navigate the evolving landscape. Visit our Energy Incentives Services page for expert support.
- Stay Informed: For ongoing updates on 179D and other energy incentives, follow Concord News.
This information is intended for educational purposes and should not be considered tax or legal advice. Always consult with a qualified professional regarding your specific situation.