OBBBA Changes: 179D for Designers (AEC Firms)

As a tax consultant at aecre consulting, I frequently connect with architects, engineers, and contractors who uncover hidden value through the 179D tax deduction. This incentive not only promotes energy-efficient building designs but also puts substantial tax savings directly into the hands of qualifying designers on public projects. With our in-house 179D expertise we partner nationwide to help professionals like you maximize these benefits. Recent changes from the One Big Beautiful Bill Act (OBBBA) have sharpened focus on timelines, so let's dive into the facts and what they mean for your practice.

179D Tax Deduction Review

To start, recall how 179D works: it's for commercial buildings or multifamily over four stories that achieve energy efficiency under ASHRAE 90.1-2007 standards. This means at least 25 percent reduction in energy costs via lighting, HVAC, or envelope upgrades. For private projects, owners claim it, but on government or nonprofit buildings, designers—architects, engineers, or contractors—can receive allocation to claim the deduction themselves. The max adjusts yearly; in 2026, it's up to $5.94 per square foot, scaling with project size.

OBBBA Impacts to 179D for Designers

OBBBA, enacted this year, adds a sunset: construction must begin by June 30, 2026, to qualify. That's keyed to the start date, not placement in service. Meet the IRS's Physical Work Test, like foundation work, or the 5% Safe Harbor via costs incurred, and you're in—even if finishing lags into later years. Permits or plans don't suffice; action is required.

This deadline is energizing the design community in commercial real estate. Imagine you're the lead engineer on a 180,000-square-foot municipal office, budgeted at $42 million. Qualifying under ASHRAE 90.1-2007 could allocate over $1,045,800 in deductions to your firm in 2025, boosting your bottom line.

Currently in late 2025, commercial real estate trends indicate a surge in public-sector projects amid infrastructure pushes and previous green initiatives despite the new legislation. Architects are integrating energy modeling early, engineers are optimizing HVAC for ASHRAE compliance, and contractors are executing to lock in allocations. Yet, 179D's track record adds perspective—introduced in 2005, it has faced sunsets multiple times but always seen extensions via legislation like the Tax Relief Act or Consolidated Appropriations Act. It went permanent in 2020, then enhanced in 2022's Inflation Reduction Act. This resilience hints that OBBBA's June 30, 2026, cutoff might evolve with industry advocacy and sustainability priorities.

179D after the OBBBA

Still, proactive steps pay off. I've spoken with multiple AEC firms who were allocated 179D on past public works, turning efficiency into profit. For a 220,000-square-foot hotel conversion for nonprofit use, deductions can reach over $1,278,200 when all of the right pieces come together. These not unusual 179D tax deduction scenarios enhance cash flow for reinvestment in your designs.

How AEC Companies can continue with 179D

Whether you're an architect sketching high-rises, an engineer fine-tuning systems, or a HVAC contractor contributing to a project, OBBBA urges starting projects by mid-2026. Section 179D specific energy assessments against ASHRAE 90.1-2007 are accessible, and the allocated deductions are transformative.

Ultimately, OBBBA sets a clear boundary for 179D, but its enduring history suggests potential for continuity. For designers in commercial real estate, seizing this now means tangible gains. If your pipeline includes qualifying public projects, these incentives could redefine your financial edge.