Published September 1, 2026 · Last updated: August 2026 · Tax Preparation & Planning
Section 179D and 45L After OBBBA: What Energy Tax Breaks Developers Can Still Claim
For nearly two decades, two federal incentives rewarded developers for building energy-efficient property: Section 179D, a per-square-foot deduction for efficient commercial buildings, and Section 45L, a per-home credit for efficient residential construction. The One Big Beautiful Bill Act changed that. Both were given a hard sunset: 179D terminates for property whose construction begins after June 30, 2026, and 45L terminates for homes acquired after that same date (per the U.S. Department of Energy).
That deadline has now passed, so this is not an "act fast" article, it is a "make sure you captured what you are owed" article. If your project began construction, or your homes were acquired, on or before the cutoff, or if you have prior-year buildings that were never analyzed, there may still be significant deductions and credits available. This guide explains what each incentive was worth, exactly how the timing rules work, and the two ways a developer can still claim value after the sunset.
- Section 179D (Energy Efficient Commercial Building Deduction) was worth up to $5.81 per square foot with prevailing-wage and apprenticeship requirements met.
- Section 45L (New Energy Efficient Home Credit) was worth up to $5,000 per qualified home to the builder or developer.
- OBBBA sunset both: 179D ends for property whose construction begins after June 30, 2026; 45L ends for homes acquired after June 30, 2026.
- For 179D, the test is the construction-start date, not placed-in-service, so a project that broke ground in time can still qualify even if it finishes later.
- Lookback studies can still capture 179D deductions on prior-year commercial buildings, generally without amending returns.
- For future projects, energy efficiency no longer carries these federal incentives, so the economics must be rebuilt on other grounds.
What Were 179D and 45L?
These were the two federal incentives that put real dollars behind energy-efficient construction, and for an active developer they were among the more valuable line items available.
Section 179D, the Energy Efficient Commercial Building Deduction, rewarded property, interior lighting, HVAC, hot water, and building-envelope systems, that reduced a building's energy and power costs by a required percentage. Enhanced under the Inflation Reduction Act, the deduction could reach up to $5.81 per square foot when prevailing-wage and apprenticeship requirements were met. On a large commercial building, that scales into six or seven figures. Notably, 179D was never limited to owners: architects, engineers, and contractors who designed government or nonprofit buildings could claim it directly through an allocation letter.
Section 45L, the New Energy Efficient Home Credit, gave eligible contractors and developers a credit of up to $5,000 per qualified energy-efficient home that a buyer acquired or a tenant leased. For a subdivision or multifamily developer, that per-unit credit multiplied across every home in the project.
What Did OBBBA Change, and When?
The One Big Beautiful Bill Act (Public Law 119-21) accelerated the end of both incentives, well ahead of their prior expiration dates. The cutoffs are specific and they have now arrived:
- Section 179D does not apply to property the construction of which begins after June 30, 2026. Projects that break ground after that date do not qualify, regardless of when they are completed.
- Section 45L is terminated for homes acquired after June 30, 2026, a sharp change from prior law, which had extended the credit through 2032.
Because that date has passed, neither incentive is available to plan a brand-new project around anymore. But the sunset is defined by a specific triggering event, construction start for 179D, acquisition for 45L, and that is exactly what creates the remaining opportunities for developers whose projects straddled the deadline or predate it. The rest of this guide is about capturing those.
How Does the 179D Construction-Start Test Work?
This is the most important nuance for a developer with an active project, and it is frequently misunderstood. The 179D sunset is keyed to when construction begins, not to when the building is placed in service. So a project that broke ground on or before June 30, 2026 can still qualify for 179D even if construction is ongoing and the building will not be finished and placed in service until 2027 or later.
In practice, that means an in-flight project that started in time is still in scope, and the deduction can be claimed when the property is placed in service down the road. What makes or breaks the claim is documentation: energy-modeling reports, the required certifications, and clear, defensible records establishing the construction-start date. If you have a project that began near the cutoff, do not assume the deduction is gone, confirm the start date and preserve the records, because a qualifying project can carry a substantial deduction into a future return.
The 179D and 45L window has closed for new projects, but developers with in-flight, recently completed, or never-analyzed buildings may still be owed real money. We sweep your projects for every remaining eligible claim before it lapses.
Check your projects for remaining claims →Can You Still Claim 179D on Past Buildings?
Yes, and with the forward-looking window closed, this is one of the main remaining opportunities. A lookback study lets a building owner who placed energy-efficient commercial property in service in prior years, but never claimed the 179D deduction, capture that missed deduction on a current return, generally without amending prior returns.
Plenty of developers and owners built or substantially renovated commercial property in recent years with efficient lighting, HVAC, or envelope systems and simply never ran a 179D analysis at the time, so the deduction was left on the table. Those buildings, if they were placed in service in eligible years, may still support a retroactive claim now. Given that no new projects can qualify going forward, sweeping your existing portfolio for unclaimed 179D is one of the last ways to extract value from this incentive, and the sooner it is reviewed, the more years remain open to claim.
What Happened to the 45L Home Credit?
Section 45L followed the same June 30, 2026 sunset, keyed to a different event: it is terminated for homes acquired after that date. For a residential developer, the practical question is whether qualifying homes were acquired by a buyer or leased as a residence on or before the cutoff. Homes that closed in time can still generate the up-to-$5,000-per-home credit for the eligible contractor or developer.
So a builder who completed and sold energy-efficient homes in a subdivision or multifamily project before the deadline should confirm that the 45L credit was actually claimed for each qualifying unit, across many homes, that adds up quickly, and it is the kind of per-unit credit that is easy to under-claim in the rush of closings. As with 179D, the credit depends on meeting the energy-efficiency standards and maintaining the certification documentation. Homes acquired after the cutoff, unfortunately, no longer qualify at all.
What Should a Developer Do Now?
With both incentives sunset, the developer's job shifts from planning around them to two concrete actions:
- Capture what you are still owed. Review every project that began construction (179D) or had homes acquired (45L) on or before June 30, 2026, plus any prior-year commercial buildings that could support a 179D lookback. Make sure no eligible deduction or credit goes unclaimed, and that the documentation is in order to defend it.
- Rebuild the model for future projects. Energy efficiency no longer carries these particular federal incentives, so decisions to build beyond code should be re-underwritten on their own merits, utility savings, tenant and buyer demand, financing terms, and any remaining state or local programs, rather than on 179D or 45L.
The larger lesson is one this whole area keeps teaching: tax incentives are timing-sensitive, and the ones tied to a triggering date reward developers who track the calendar and keep clean records. The value that remains in 179D and 45L belongs to the developers who go back and claim it deliberately, rather than assuming a closed window means an empty account.
Frequently Asked Questions
Stephen Calvo, CPA
Only for projects that met the cutoff. Under the One Big Beautiful Bill Act, Section 179D terminates for property whose construction begins after June 30, 2026, and Section 45L terminates for homes acquired after that same date. Both had been expected to run for years longer, so this was a sharp acceleration. That deadline has now passed, which means these are no longer incentives you can plan a new project around. But if your project began construction on or before June 30, 2026, or your qualifying homes were acquired by then, you may still be entitled to substantial deductions or credits, even if the building is not yet placed in service.
Nick Termine, CPA
Section 179D, the Energy Efficient Commercial Building Deduction, rewards energy-efficient systems, lighting, HVAC, hot water, and building envelope, that reduce a building's energy costs by a set percentage. With the prevailing-wage and apprenticeship requirements met, the deduction could reach up to $5.81 per square foot, which on a large commercial building runs to hundreds of thousands or even millions of dollars. It was never limited to owners: architects, engineers, and contractors who designed government or nonprofit buildings could claim it directly through an allocation letter from the building owner. For qualifying projects that met the construction-start deadline, that value is still on the table.
Stephen Calvo, CPA
Possibly, and this is the key nuance. The 179D test is the date construction began, not the date the building is placed in service. If your project broke ground on or before June 30, 2026, it can remain eligible even if construction is ongoing or the building will not be finished and placed in service until later. So a project that started in time but completes in 2027 may still qualify. The documentation matters here, energy modeling, certifications, and clear records of the construction start date, so if you have an in-flight project near that cutoff, it is worth confirming its status rather than assuming the deduction is gone.
Nick Termine, CPA
Yes, through a lookback study, and this is often overlooked. If you placed energy-efficient commercial buildings in service in prior years and never claimed the 179D deduction, a lookback study can capture that missed deduction on your current return, generally without amending prior returns. Given that the forward-looking window has now closed, these lookback claims are one of the main remaining opportunities. If you have built or renovated commercial property in recent years with efficient lighting, HVAC, or envelope systems and did not run a 179D analysis at the time, it is worth checking whether a retroactive claim is available before more time passes.
Stephen Calvo, CPA
Section 45L, the New Energy Efficient Home Credit, gave eligible contractors and developers a credit for each qualified energy-efficient home that a buyer acquired or a tenant leased as a residence. The credit could be as high as $5,000 per home depending on the efficiency level achieved and the type of home. For a builder of a subdivision or a multifamily project, that per-unit credit added up quickly across many homes. OBBBA terminated it for homes acquired after June 30, 2026, cutting short a credit that had been extended through 2032. Homes acquired by that date may still generate the credit for the builder.
Nick Termine, CPA
Two things. First, capture what you are still owed: review any project that began construction, or homes acquired, on or before June 30, 2026, and any prior-year commercial buildings that could support a 179D lookback, so no eligible deduction or credit is left unclaimed. Second, reset expectations for future projects: energy efficiency no longer carries these particular federal incentives, so the economics of going beyond code should be re-evaluated on their own merits, utility savings, tenant demand, and any remaining state or local programs, rather than on 179D or 45L. We help developers sweep for the last eligible claims and rebuild the model for projects that come after the sunset.
Work With TC Advisors
The 179D and 45L window has closed for new construction, but developers with qualifying in-flight projects, recently sold energy-efficient homes, or never-analyzed commercial buildings may still have real deductions and credits to claim. We help New Jersey developers sweep their projects for every remaining eligible claim, coordinate the documentation, and rebuild the tax model for projects that come after the sunset. You work directly with a partner, no handoffs. Our Hackensack office serves developers across Bergen County and the New York metro through year-round tax planning.
Schedule a consultation →- U.S. Department of Energy: 179D Energy Efficient Commercial Buildings Tax Deduction (OBBBA termination)
- Cornell Legal Information Institute: IRC §179D, energy efficient commercial buildings deduction
- Cornell Legal Information Institute: IRC §45L, new energy efficient home credit
- Internal Revenue Service: Energy Efficient Commercial Buildings Deduction
Related: Cost Segregation Studies for NJ Real Estate, NJEDA Development Incentives, and Section 263A and UNICAP for Developers.
