Architecture and Engineering Firms Face Permanent Loss of Six-Figure Tax Deductions

Section 179D Energy Efficient Commercial Building Deduction to terminate on June 30, 2026

Published on Feb. 17, 2026

Got story updates? Submit your updates here. ›

The One Big Beautiful Bill Act, signed into law in July 2025, permanently eliminates the Section 179D deduction for architecture and engineering firms for any construction project that begins after June 30, 2026. This represents the final opportunity for A&E firms that have designed energy-efficient government buildings, public schools, or nonprofit facilities to claim deductions worth up to $5.81 per square foot, which can translate to significant tax savings for a single large project.

Why it matters

The majority of eligible A&E firms have never claimed these deductions, not because they don't qualify, but because their accountants are unaware of the designer allocation mechanism that makes the deduction available to design professionals rather than building owners. This knowledge gap has resulted in firms leaving hundreds of thousands of dollars in potential tax savings on the table.

The details

Section 179D was originally designed as a building owner deduction, but the tax code allows government agencies, public schools, and nonprofit organizations to allocate the deduction to the designer of the building's energy-efficient systems. However, these entities have no incentive to offer the allocation letter, and generalist CPAs who prepare taxes for architecture firms typically don't know to ask about it. Sunbridge Advisory, a San Antonio-based accounting firm, is raising awareness about this opportunity before the deduction is permanently eliminated.

  • The One Big Beautiful Bill Act was signed into law on July 4, 2025.
  • Section 179D will be permanently eliminated for any construction project that begins after June 30, 2026.
  • The open tax years for amended returns to claim missed deductions are 2022, 2023, and 2024. The 2022 amendment deadline arrives in April 2026.

The players

Sunbridge Advisory

A San Antonio-based accounting firm serving architecture, engineering, and construction firms nationwide.

Levi Kedowide

CPA and Partner at Sunbridge Advisory LLC.

Got photos? Submit your photos here. ›

What they’re saying

“The standard tax interview for an architecture firm doesn't ask about the energy performance of government buildings you've designed. It asks about revenue, expenses, and payroll. If your accountant hasn't worked extensively with A&E firms, the deduction never makes it onto your radar. We've seen firms that designed three or four qualifying buildings over the past decade and left $250,000 or more in deductions on the table simply because no one thought to request the allocation letters.”

— Levi Kedowide, CPA and Partner (Sunbridge Advisory)

“The firms most likely to benefit are the ones least likely to know about this. Small and mid-sized architecture firms that have done government work-courthouses, fire stations, school buildings, VA facilities-and whose CPA is a generalist. The larger firms with Big Four accountants tend to have this on their radar already. It's the 5-to-20-person firms that are consistently leaving money on the table.”

— Levi Kedowide, CPA and Partner (Sunbridge Advisory)

What’s next

Sunbridge Advisory recommends that architecture and engineering firms take three immediate steps: 1) Conduct a project inventory of all government, public school, and nonprofit building projects completed since 2006 where the firm provided design services. 2) Identify which of those projects were designed to achieve energy performance beyond minimum code requirements. 3) Initiate allocation letter requests with building owners as early as possible, as government processing timelines are the primary bottleneck in the claim process.

The takeaway

This case highlights the significant tax savings opportunity that many architecture and engineering firms have been missing out on due to a lack of awareness about the Section 179D deduction. With the deduction set to be permanently eliminated in 2026, firms need to act quickly to identify and claim any eligible projects before the window closes.