Act Before June 30: Energy Tax Credits Your Business Can Still Claim

If you run a construction or manufacturing business, there are two federal tax incentives you’ll want to know about before June 30, 2026.

The One Big Beautiful Bill Act (OBBBA), signed into law in mid-2025, created several changes to the federal tax code. Among them was an accelerated end date for several energy-related tax incentives, including Section 179D and Section 45L. Both have been valuable tools for businesses in your industries for years, but the window to take advantage of them is closing fast.

What Is Section 179D?

Section 179D is a deduction for energy-efficient improvements made to commercial buildings. That includes warehouses, manufacturing facilities, and office buildings, both new construction and upgrades to existing facilities. The improvements that qualify generally fall into three categories: lighting systems, HVAC, and the building envelope (walls, roofs, and windows).

The deduction is worth between $0.58 and $5.81 per square foot for projects placed in service in 2025, and slightly higher at $0.59 to $5.94 per square foot for projects placed in service in 2026 (per IRS Rev. Proc. 2025-32), depending on how much energy savings the project achieves and whether prevailing wage requirements are met. To qualify, the building needs to hit at least a 25% reduction in projected energy costs, verified by an approved energy study.

To put that in perspective: on a 50,000-square-foot facility, you could be looking at a deduction of $295,000 or more.

What About Section 45L?

Section 45L is a tax credit for builders of energy-efficient new homes and residential units. If your construction business includes residential work, this one applies to you. The credit is worth up to $5,000 per home, depending on the energy efficiency level achieved. For the development of 40 homes, that’s potentially $200,000 in credits.

One important distinction: unlike 179D, the 45L deadline is tied to when the home is acquired by the buyer, not when construction starts. That means homes need to close on or before June 30, 2026.

If you have residential projects nearing completion, it’s worth pushing to get those sales across the finish line before the deadline.

Why the Deadline Matters

For Section 179D, construction must officially begin on or before June 30, 2026. The IRS recognizes two ways to establish that construction has started:

• Physical work begins on site, such as excavation, demolition, or installation

• At least 5% of total project costs have been incurred

How you document this matters. If the paperwork isn’t in order, you could miss out on the deduction even if you technically started on time. This is an area where working closely with your accountant ahead of the deadline is especially important.

What You Should Do Now

Here are the most important steps to take:

1. Review your project pipeline.

Look at any commercial or manufacturing projects that are planned or in early stages. Even a project that hasn’t broken ground may still qualify if you can move the start date up.

2. Consider retrofits on existing buildings.

HVAC upgrades, lighting overhauls, and envelope improvements on your current facilities can qualify under 179D, not just new construction.

3. Look back at prior years.

If you completed energy-efficient improvements in past years and never claimed 179D, a look-back study may allow you to capture that deduction retroactively, without amending prior returns.

4. Get your documentation in order.

Clear records of physical work started, or costs incurred are essential to establishing eligibility. Don’t leave this until after the fact.

The Bottom Line

June 30 is quickly approaching, and construction and manufacturing timelines don’t always leave a lot of room to move quickly. The good news is that if you act now, there’s still time to take advantage of these incentives before they disappear.

If you have questions about how these incentives apply to your situation, don’t hesitate to reach out to our construction accounting team.

To learn more about LGT and how we can serve you, contact us here.