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Energy Efficient Commercial Buildings Deduction (Section 179D)
IRS / U.S. TreasurySee programDeadline: New construction: begin construction by June 30, 2026 (OBBBA §70507). Lookback for 2006–2024 completed projects: permanent via Form 7205.
Federal tax deduction (not credit) under IRC Section 179D for energy-efficient improvements to commercial buildings. Substantially expanded by Inflation Reduction Act (lower 25% energy savings threshold, prevailing-wage bonus, allocation to designers of tax-exempt buildings). TWO TRACKS post-OBBBA: (1) NEW construction is terminated for property the construction of which begins after June 30, 2026 (OBBBA §70507); (2) the 2006–2024 LOOKBACK (catch-up study via Form 7205) is UNAFFECTED and is the dominant near-term value. Most relevant for evlv.energy clients pursuing LED retrofits, HVAC upgrades, and building envelope improvements.
Program details
- Agency
- IRS / U.S. Treasury
- Level
- Federal
- Category
- Commercial Building Energy Efficiency
- Eligibility
- Owners of commercial buildings (or designers of public/non-profit buildings) installing energy-efficient HVAC, lighting, or building envelope improvements that achieve at least 25% energy reduction vs ASHRAE 90.1-2007. Tax-exempt building owners (non-profits, government, tribal) can allocate the deduction to the designer/contractor.
- Funding Amount
- Up to $5.94/sqft (2026, Rev. Proc. 2025-32) for buildings meeting prevailing wage + apprenticeship; otherwise base deduction $0.59–$1.19/sqft. Sliding scale based on energy savings achieved (≥25% reduction vs ASHRAE 90.1 reference).
- Deadline
- New construction: begin construction by June 30, 2026 (OBBBA §70507). Lookback for 2006–2024 completed projects: permanent via Form 7205.
- Status
- open
- Project Types
- lighting_led, hvac, building_envelope, commercial_efficiency
- Client Types
- commercial
- Notes
- TWO TRACKS: (1) NEW construction must begin by 6/30/2026 (weeks away); (2) the 2006–2024 lookback (Form 7205) is permanent and is the dominant value — lead with it. Pair with: ComEd Energy Efficiency Program (lighting/HVAC rebates), DCEO Public Sector Energy Efficiency, IL CPACE financing. For lighting calculator outputs, surface this deduction prominently when project size justifies engineering certification cost (~$5K–$20K).
Source: Grantya research. Confirm current terms with the administering agency before applying.