Section 179D rewards energy-efficient commercial buildings with a deduction that scales with performance, up to $5.81 per square foot in 2025. It’s available to building owners and, through allocation, to the architects and engineers who design public and tax-exempt projects.
See If You QualifySection 179D allows a deduction for installing energy-efficient interior lighting, HVAC and hot-water systems, or building-envelope improvements in commercial buildings and residential buildings of four or more stories. The amount is per square foot and rises with the energy savings achieved, measured against an ASHRAE reference building, so a larger, more efficient building produces a larger deduction.
The deduction depends on energy savings and on whether the project met prevailing-wage and apprenticeship (PWA) requirements.
The deduction can’t exceed the cost of the qualifying property, and is indexed for inflation. On a 100,000-square-foot building at the top tier, that’s up to roughly $581,000 for a single project.
The 2025 law terminated 179D for projects that begin construction after June 30, 2026. That date has passed, so new projects no longer qualify, but the deduction is very much alive for work already underway and for prior years. Projects that broke ground on or before the cutoff remain eligible even if they finish later, and prior open years can still be captured.
Owners of commercial buildings, and residential buildings of four or more stories, who built or retrofitted for energy efficiency, on new work or via a look-back on prior years.
179D for owners →Designers of government and tax-exempt buildings can receive the deduction by allocation, one of the most overlooked opportunities in the code for AEC firms.
179D for designers →179D isn’t self-certified. It requires energy modeling against an ASHRAE reference building, a certification by a qualified, independent engineer or contractor, and a site visit, plus prevailing-wage and apprenticeship documentation to reach the enhanced tier. That’s what makes the deduction defensible, and it’s exactly what the study delivers.
What OBBBA changed, and exactly what still qualifies.
Learn more →The allocation opportunity for architects and engineers.
Learn more →New construction, retrofits, and look-back claims.
Learn more →ASHRAE modeling, certification, and prevailing wage.
Learn more →This page is general information, not tax or legal advice. Section 179D eligibility, amounts, certification, and deadlines depend on the project’s facts and current law, and are determined through the required energy study and certification in coordination with your tax advisor. Novaric does not guarantee deduction amounts or any tax outcome.