179D Tax Deduction For Commercial Structures

179D Tax Deduction For Commercial Structures

The recently passed “One Big Beautiful Bill Act (OBBBA)” terminates the section 179D deduction for energy-efficient commercial buildings for property of which construction begins after June 30, 2026.

Building owners, architects, contractors and designers can qualify for up to $5.81 per square foot deduction for installing energy efficient lighting, heating and cooling systems and building envelope.

The §179D Energy Efficient Commercial Building Deduction is a federal tax incentive designed to encourage taxpayers to construct energy-efficient buildings as well as encourage building owners to make improvements to existing structures that reduce energy and power costs. As an added inducement, architects, engineers, contractors, environmental consultants, or energy services providers may be allocated the deduction on tax-exempt projects if they play a critical role in the design of the building.

This incentive is often referred to as the EPAct Deduction after the Energy Policy Act of 2005, which created it, or as the §179D Deduction, which relates to the Internal Revenue Code section that codified it.

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