Section 179D (Commercial Buildings Deduction)
Section 179D is a former US federal tax deduction for energy-efficient commercial building improvements. It was repealed for projects beginning construction after June 30, 2026, by the 2025 reconciliation law.
Section 179D allowed building owners and designers to deduct the cost of energy-efficient commercial building property, including interior lighting, HVAC, and building envelope upgrades. The maximum deduction was up to $5.81 per square foot in 2025 when prevailing-wage and apprenticeship requirements were met. Without those requirements, the maximum was about $1.16 per square foot.
The deduction was especially valuable for government-owned buildings, where the public owner could not claim the deduction and instead allocated it to the designer. Projects had to be certified by an independent engineer or contractor using IRS-approved software.
As of mid-2026, the deduction is no longer available for new projects. The One Big Beautiful Bill (Public Law 119-21) repealed Section 179D for projects that begin construction after June 30, 2026. Organizations should confirm current eligibility with a tax advisor before modeling any federal tax incentives into an energy project.
Frequently asked questions
What was the maximum Section 179D deduction? +
In 2025, the maximum Section 179D deduction was up to $5.81 per square foot for projects meeting prevailing-wage and apprenticeship requirements. Without those requirements, the maximum was roughly $1.16 per square foot.
Is Section 179D still available? +
Section 179D was repealed for projects beginning construction after June 30, 2026, by the 2025 reconciliation law. It is no longer a reliable incentive for new energy efficiency projects.
Who could claim the Section 179D deduction? +
Building owners could claim Section 179D. For government-owned buildings, the deduction could be allocated to the designer, architect, engineer, or contractor.
Related terms
Energy Efficiency
Energy efficiency means using less energy to deliver the same service or output. In the context of carbon management, energy efficiency is the fastest, lowest-cost decarbonization lever because every unit of energy saved reduces both operating costs and greenhouse gas emissions simultaneously.
LED Lighting Retrofits
An LED lighting retrofit replaces fluorescent, HID, or incandescent fixtures with light-emitting diode (LED) technology. Retrofits typically cut lighting energy use by 40-70%, pay back in one to three years, and are usually the first project in a facility's energy efficiency roadmap.
HVAC Optimization
HVAC optimization improves heating, ventilation, and air conditioning system efficiency through controls, scheduling, setpoint tuning, and equipment upgrades.
Building Envelope
The building envelope is the physical barrier between conditioned interior space and the outdoors, including walls, roof, windows, doors, and insulation.