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If you are planning to use the 179D energy-efficient building deduction in 2026, there is one phrase you need to understand clearly: begin construction.
It sounds simple, but it is not just about when a project is finished or when equipment is installed. Under current rules, whether your project qualifies for 179D often depends on when construction officially begins.
Missing this detail can mean missing the deduction entirely.
This post explains what “begin construction” means in plain language and how it affects planning for 179D in 2026.
179D is a federal tax deduction for energy-efficient commercial buildings. It applies to things like:
It can be claimed by building owners or, in some cases, allocated to designers such as architects and engineers.
The value can be significant. For large buildings, the deduction can reach hundreds of thousands of dollars or more.
Current law limits who can claim 179D based on when construction starts.
If a project begins construction on or before June 30, 2026, it can still qualify for 179D.
If construction begins after that date, the deduction is no longer available under current rules.
That is why timing matters more than ever.
The IRS allows two ways to show that construction has begun.
You only need to meet one of them.
Construction can begin when physical work of a significant nature starts. This can include:
The work must be real and meaningful. Planning, design, or ordering materials alone does not count.
You can also begin construction by spending at least five percent of total project costs.
This means:
The spending must be documented and tied directly to the project.
A property owner plans a major HVAC and lighting upgrade in a commercial building.
If the owner waits until the fall to start work, the project may miss the 179D window.
But if they:
The project may still qualify.
A developer plans to break ground on a new office building.
If no physical work or qualifying spend happens before June 30, the project likely will not qualify for 179D.
This is where early coordination matters. Small timing changes can have large tax impacts.
For government or tax-exempt buildings, 179D is often allocated to designers.
Design firms need to know:
Without that clarity, the allocation may not be valid.
Many people assume:
None of these are true.
The start of construction is what matters first.
If you are considering a project that could qualify for 179D:
Early planning can be the difference between qualifying and missing out.
179D can be a powerful deduction, but only if you meet the timing rules.
In 2026, “begin construction” is not just a technical detail. It is the gatekeeper.
Understanding it early helps you plan smarter, avoid surprises, and make sure your energy-efficient projects get the tax benefit they deserve.
If you are working on a project that may qualify for 179D, timing matters more than ever. Our team helps building owners, developers, and designers understand how “begin construction” rules apply and how to plan projects before key deadlines.
Book a call with TaxTaker to review your project timeline and see if you still qualify for 179D.
Julianna Lopez is a Project Manager with over five years of experience in federal energy tax incentives. She holds a B.S. in Industrial & Systems Engineering and is a Professional Engineer, actively working toward multi-state licensure. At TaxTaker, Julianna leads and manages energy incentive projects for a wide range of commercial and institutional clients, helping them leverage energy-efficient design and construction to drive long-term value. She brings a strong, process-driven and analytical approach to optimizing energy incentives while supporting sustainable building practices.
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