Oct 28, 2025 2026 Inflation Adjustment Raises §179D Deduction to $5.94 with PWA
The §179D Energy Efficient Commercial Buildings Deduction has been adjusted for inflation in 2026, offering enhanced tax incentives for energy-efficient new construction as well as retrofits. To qualify, construction of a significant nature must begin before June 30, 2026, but there is no deadline for construction to be completed.
Updated Deduction Rates:
- Up to $5.94 per square foot for projects that meet prevailing wage and apprenticeship requirements
- Up to $1.19 per square foot for projects that do not meet those requirements
This deduction applies to improvements in HVAC systems, lighting, and building envelope, making it a valuable opportunity for both new builds and renovations.
§179D allows building owners and architects, engineers, and contractors who design systems for government-owned buildings to deduct the cost of installing energy-efficient systems, including:
- Lighting systems
- HVAC and hot water systems
- Building envelope improvements (like insulation, windows, roofing)
Deduction amounts are based on places in service dates. Deductions are higher when projects meet Prevailing Wage and Apprenticeship (PWA) requirements.
| PIS Year | Amount per sqft | PWA Amount per sqft |
| 2026 | $0.59 – $1.19 | $2.97 – $5.94 |
| 2025 | $0.58 – $1.16 | $2.90 – $5.81 |
| 2024 | $0.57 – $1.13 | $2.83 – $5.65 |
| 2023 | $0.54 – $1.07 | $2.68 – $5.36 |
If you’re considering a project in 2026, contact ICS to maximize your deduction.