June 30, 2026: The Hard Stop Date — and What It Actually Means
Section 179D does not fade out gradually. It ends on a single date: June 30, 2026. After that date, no new projects can begin construction and qualify for the deduction. The One Big Beautiful Bill Act (OBBBA), Public Law 119-21, established this as the permanent sunset of the program. No extension legislation is pending as of this writing.
This is a construction start deadline, not a completion deadline. A project that begins qualifying physical work on June 28 and completes installation in December is still fully eligible. The critical test: did qualifying construction begin before June 30, 2026? For full details on what the IRS defines as qualifying deduction amounts and building eligibility, see our Section 179D Deduction Guide.
Many commercial energy projects take 6–16 weeks from decision to construction start: energy modeling (2–4 weeks), contractor selection (2–4 weeks), equipment procurement lead times (4–12 weeks for commercial HVAC). With 79 days remaining, projects that haven't begun procurement are at serious risk of missing the June 30 deadline.
What Happens If You Miss the June 30 Deadline?
Missing June 30 is not a missed paperwork deadline — it is a permanent loss of eligibility. There is no grace period, no retroactive election, and no "close enough" provision in the current statute. Here is precisely what changes after the deadline:
| Scenario | Before June 30, 2026 | After June 30, 2026 |
|---|---|---|
| New HVAC replacement project | ✓ Eligible (up to $5.94/ft²) | ✗ No deduction available |
| New LED lighting retrofit | ✓ Eligible (up to $5.94/ft²) | ✗ No deduction available |
| Building envelope (insulation, windows) | ✓ Eligible (up to $5.94/ft²) | ✗ No deduction available |
| Project started before June 30, completing after | ✓ Eligible — start date controls | ✓ Eligible — start date controls |
| Prior-year projects not yet claimed | ✓ Still claimable via Form 3115 | ✓ Still claimable via Form 3115 |
| Government building design allocation | ✓ Eligible for designers | ✗ No new project allocations |
The financial impact of missing the deadline is substantial. For a 200,000 ft² office building achieving 50% energy savings with prevailing wage compliance, the lost deduction is $1,072,000 in forgone tax deduction — equating to approximately $225,120 in actual federal taxes at a 21% corporate rate. This is a one-time, non-recurring opportunity.
If your project began qualifying construction (physical work or 5% of costs incurred) before June 30, 2026, you are fully protected — regardless of when you file, when construction completes, or when the property is placed in service. Focus on projects that haven't started yet.
2026 Savings Table: Building Type × Deduction Amount
The deduction amount per square foot scales with energy savings percentage. Rates shown reflect IRS inflation-adjusted figures for 2026. Projects meeting prevailing wage and apprenticeship (PWA) requirements earn 5× the base rate.
| Energy Savings vs. Baseline | With PWA (2026 Rate) | Without PWA (2026 Rate) | Example: 100,000 ft² (PWA) |
|---|---|---|---|
| 25% (minimum) | $0.50/ft² | $0.10/ft² | $50,000 |
| 30% | $1.07/ft² | $0.21/ft² | $107,000 |
| 35% | $1.61/ft² | $0.32/ft² | $161,000 |
| 40% | $2.14/ft² | $0.43/ft² | $214,000 |
| 45% | $2.68/ft² | $0.54/ft² | $268,000 |
| 50%+ (maximum) | $5.94/ft² | $1.07/ft² | $536,000 |
Source: IRS.gov — Energy Efficient Commercial Buildings Deduction. Rates are inflation-adjusted annually; 2026 maximum of $5.94/ft² reflects current IRS guidance. Confirm with a qualified tax advisor before filing.
Real-World Example: Office Building HVAC Retrofit
What "Construction Start" Means for the June 30 Deadline
The June 30, 2026 deadline is a construction start deadline — not a completion deadline. A project that breaks ground in late June 2026 and completes six months later is still fully eligible. Understanding exactly what qualifies as a "start" under IRS rules is critical.
The IRS applies two tests to determine whether construction has begun by the deadline. Either test, if satisfied by June 30, 2026, preserves the project's eligibility:
- Physical Work Test: Significant physical work of a permanent nature has commenced at the building site, or at an off-site factory or manufacturing facility for pre-fabricated or modular components. The work must be integral to the qualifying energy system — not preliminary site prep or demolition that would occur regardless of the 179D claim.
- 5% Safe Harbor (Cost Test): The taxpayer has paid or incurred costs equal to at least 5% of the total expected cost of the qualifying energy property. This can include equipment purchases, materials procurement, and labor directly allocable to the qualifying systems.
Signing contracts, requesting proposals, ordering equipment, applying for permits, or conducting energy audits do not constitute a construction start under either IRS test. Physical work or 5% of cost must be documented before June 30, 2026.
Once either test is satisfied, the project maintains its 179D eligibility even if construction extends well past June 30. The deadline is about when you start — not when you finish. Projects with long lead times (large HVAC replacements, full envelope retrofits) should begin procurement and installation well in advance of June 30 to avoid last-minute documentation risks.
Maintain clear records of the construction start date: signed work orders, contractor invoices showing dates, photos, and progress reports. The IRS may request documentation of the start date to verify eligibility. A qualified tax advisor should review your documentation approach before June 30.
Step-by-Step: How to Claim 179D Before June 30
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1Run an energy model to assess baseline savings
A certified energy modeler must compare your building's energy performance against the ASHRAE 90.1 reference building. The model determines your savings percentage — which determines your deduction rate. This step also identifies which systems (HVAC, lighting, envelope) qualify and which don't reach the 25% threshold.
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2Verify prevailing wage and apprenticeship compliance
To earn the 5× enhanced deduction rate (up to $5.94/ft²), workers performing qualifying installation must be paid prevailing wages as determined by the Department of Labor, and a minimum percentage of labor hours must be performed by registered apprentices. This requirement applies to the contractor's workforce — start confirming compliance with your GC now.
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3Get a 179D certification from a qualified inspector
Section 179D requires a certification from a qualified individual (typically a licensed engineer or contractor) who is not related to the taxpayer. The certifier inspects the project and prepares a written report certifying that the installed property meets the energy performance requirements. The IRS provides a model certification format.
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4For government buildings: obtain a signed allocation letter
If you're a designer claiming the deduction allocated from a government owner, you need the government entity to sign an allocation letter. This is typically done at the completion of the project. Begin this conversation now — government procurement timelines can be slow. The letter must reference the specific systems, square footage, and deduction amount being allocated.
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5Begin qualifying construction before June 30, 2026
This is the only step with a hard deadline. Ensure physical work has begun or the 5% cost threshold is met by June 30, 2026. Coordinate with your contractor to schedule installation start dates, procure long-lead equipment, and create a paper trail of costs incurred. With 79 days left, this should begin immediately for any project not already in procurement.
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6Claim the deduction on your federal tax return
The 179D deduction is claimed on Form 3115 (if you missed prior years) or directly on your current-year return. It is taken in the year the qualifying property is placed in service. Your CPA should attach the certification documentation to the return. The deduction reduces your taxable income and cannot exceed the cost of the qualifying property.
Don't Know Your 179D Number?
Use the free calculator to estimate your deduction in under 2 minutes — enter building size, system type, and expected savings percentage.
Run 179D Calculator → Find a Certified ConsultantDeadline Q&A: What Happens Before and After June 30
The 2026 inflation-adjusted 179D deduction rates with prevailing wage compliance are: $0.50/sqft (minimum 25% savings), $1.07/sqft (30%), $2.14/sqft (40%), $2.68/sqft (45%), and $5.94/sqft (maximum, 50%+ savings). Without prevailing wage compliance, rates are approximately 20% of these figures. Use our free 179D calculator to estimate your specific deduction.