45L, 179D and 25D After the 2026 Cutoffs: What Landlords Keep

The three cutoffs side by side

Most pages written about the sunset list the dates and stop. The dates are the easy part. What matters on a return is which event the date is attached to, because a project can be built, paid for and certified before a cutoff and still earn nothing if the wrong event falls on the wrong side of it.

The IRS FAQ lists the first three dates in one table (FS-2025-05, August 21, 2025). Public Law 119-21 itself carries them as section 70508 for 45L, section 70507 for 179D and section 70506 for 25D. Before the law, 45L ran to December 31, 2032 and 25D to property placed in service by December 31, 2034; 179D had no termination subsection until section 70507 added one.

Section 45L: the credit follows the home out the door

Section 45L pays an eligible contractor for each qualified new energy efficient home that another person acquires from the contractor for use as a residence. The Form 8908 instructions define the contractor as the person that “owned and had a basis in the home during its construction”. A developer who hires a general contractor is the eligible contractor, not the general contractor. An investor who buys a finished building from a developer is not (our reading of the definition).

The amount depends on the tier. These are the six lines of Form 8908, Part I (December 2025 revision):

Three rules decide whether a unit counted before the deadline:

• A lease is an acquisition. The instructions say a home “that is leased by a person from an eligible contractor for use as a residence during the tax year is considered acquired.” That matters for build-to-rent and apartment developers: the date that counts is the day a resident signs, not the day the building was finished. The same paragraph says a home is not acquired if the contractor “retains the home for use as a residence.”
• Certification comes first. The contractor must hold the program certification before the home is acquired and before claiming the credit.
• The credit reduces basis. Under section 45L(e) the increase in basis from the expense is reduced by the credit, so the building’s depreciation base is lower (the exception is the basis of a building for the low-income housing credit).

One building, four tiers (our arithmetic). A developer finishes a 48-unit apartment building and every unit is leased to a resident on or before June 30, 2026:

If 20 of the 48 units are first leased on July 1, 2026 or later, only the other 28 count: $70,000 at the Energy Star prevailing wage tier, and nothing for the 20 (our arithmetic). The wage-proof gap is why the same building can be worth $24,000 or $120,000.

Homes acquired by June 30, 2026 are claimed on the return for the tax year in which they were acquired, which for a calendar-year taxpayer is the 2026 return (the statute allows the credit for a home acquired by a person “during the taxable year”). The IRS Form 8908 page lists a clarification for partnerships and S corporations that report credits passed through from another entity, dated September 29, 2026, and the instructions say a partnership or S corporation must file the form itself. The December 2025 revision also asks for the street address of the first 20 homes.

Section 179D: construction starts, completion does not matter

Section 179D lets the owner of a qualifying commercial building deduct the cost of energy efficient property for lighting, heating, cooling, ventilation, hot water and the building envelope, up to a ceiling per square foot that rises with the energy savings. Multifamily buildings qualify only if they are within the scope of ASHRAE Standard 90.1, and IRS Notice 2006-52 (section 5.02) says a building in scope is one that is not a single-family house, a “multi-family structure of three stories or fewer above grade”, or a manufactured house. An apartment building of four stories or more is in scope; a three-story walk-up is not.

The IRS table of ceilings, which the 2026 row of Rev. Proc. 2025-32 confirms:

For 2026 the base amount is $0.59 at 25% savings plus $0.02 for each point above 25%, capped at $1.19. With prevailing wage and apprenticeship it is $2.97 plus $0.12 per point, capped at $5.94 (Rev. Proc. 2025-32 section 4.25). The Form 7205 instructions say the prevailing wage amounts are multiplied by 5 before inflation. Section 179D(b)(1) also subtracts what was deducted for the building in the 3 preceding tax years (4 for a designer), including by previous owners, and 179D(e) reduces the property’s basis by the deduction.

A 100,000 square foot building (our arithmetic). At 40% energy cost savings, 15 points above the floor: base ceiling $0.59 + 15 x $0.02 = $0.89 per square foot, or $89,000; with prevailing wage and apprenticeship $2.97 + 15 x $0.12 = $4.77, or $477,000. At 55% the base ceiling is $1.19 ($119,000), and the prevailing wage ceiling reaches its $5.94 cap ($594,000) from 50% savings up. If a prior owner took $0.30 per square foot in 2024, the 2026 base ceiling at 40% falls to $0.59, or $59,000. The deduction can never exceed the cost of the qualifying property.

The construction-start test, and what the IRS has not said

The statute’s new subsection (i) says section 179D does not apply to property the construction of which begins after June 30, 2026. The IRS page, reviewed October 27, 2026, repeats it and adds that the rules “continue to apply to property the construction of which begins on or before June 30, 2026.” Neither the statute, the page nor the Form 7205 instructions define when construction “begins” for 179D, and we found no IRS guidance that does (our search, not an IRS statement). Tax-firm commentary points to the physical-work and cost tests used for other energy credits; that is commentary, not guidance on 179D. A project that cannot show real work before July 1, 2026 is the one at risk.

The 2027 yardstick

The IRS page also states: “For property placed in service after Dec. 31, 2026, and for which construction began after Dec. 31, 2022, ASHRAE Standard 90.1-2019 applies.” Property placed in service in 2026, or with construction begun before 2023, is measured against Standard 90.1-2007. So a building that began construction in the first half of 2026 and opens in 2027 must beat the newer, tougher standard by 25% or more to claim anything.

Retrofits

The alternative path in 179D(f) covers a building “originally placed in service not less than 5 years before” the retrofit plan, a certified cut of at least 25% in energy use intensity, and a final certification at no more than 75% of the baseline. It sits under the same termination rule, so the plan’s construction must also have begun on or before June 30, 2026.

Section 25D: never a landlord credit, now only a carryforward

Section 25D gave an individual 30% of the cost of solar, wind, geothermal, fuel cell or battery property on a dwelling used as a residence by the taxpayer. The IRS page for the credit says plainly that “You can’t claim the credit if you’re a landlord or other property owner who doesn’t live in the home”, that a property used “solely for business purposes” cannot claim it, and that business use up to 20% still gets the full credit. Section 25D(e)(7) cuts the credit to the nonbusiness share when less than 80% of an item’s use is nonbusiness. So the end of 25D changed little for a landlord: it never covered a rental.

For a homeowner the cutoff is strict. The IRS FAQ asks whether a taxpayer can claim a credit for property paid for on or before December 31, 2025 but installed after it, and answers “No.” The expenditure is treated as made when original installation is completed (section 25D(e)(8)(A)), or, for a new structure, when the owner’s original use begins.

One sentence on the IRS credit page, reviewed July 4, 2026, still says the credit continues “until the credit begins to phase out in 2033.” That is the pre-2025 law; section 25D(h), as amended, controls.

What is left: the carryforward

Section 25D(c) carries an unused credit to the next tax year, and the IRS page says an excess can be carried forward to reduce tax in future years. Public Law 119-21 section 70506 amended 25D(h) and 25D(g) only (our reading of the section). IRS Statistics of Income tables for tax year 2023 show how large the pool is:

IRS Statistics of Income counted 4,163,559 Forms 5695 for tax year 2023. The average credit was $5,531 per return with a credit and the average carryforward $7,131 per return with one (our arithmetic). Nothing in the SOI table says how much of the 2023 pool has since been used.

Rooftop solar on a rental building

A landlord who wanted 25D for solar on a rental should look at the business credits instead, and the clock there is different. Public Law 119-21 section 70513 says the section 48E credit does not apply to qualified property placed in service after December 31, 2027 that is part of a wind or solar facility, and the rule applies to facilities whose construction begins after the date 12 months after enactment, which is July 4, 2026 on our arithmetic. Energy storage technology is excepted. The 48E rules carry many other conditions (foreign-entity limits, for one) that we did not read for this page; treat this paragraph as a flag for your preparer, not an eligibility test.

What a reader can do with this

If you build or lease new homes or apartments:

• List every unit with its acquisition date. A sale closing or a lease start on or before June 30, 2026 counts; July 1 does not. A unit the contractor keeps as its own residence is not acquired (Form 8908 instructions), and a unit still unleased on July 1 is outside the date test.
• Match each unit to a tier. Single-family: $2,500 or $5,000. Multifamily: $500 or $1,000, unless you can prove prevailing wage and file Form 7220.
• Pull the certification dates. The certificate must predate the acquisition.
• Expect lower basis. The credit reduces depreciable basis under 45L(e); see our pages on bonus depreciation and depreciation recapture.

If you own or are developing a commercial or four-story-plus residential building:

• Date the first real work. Gather the contract, permit, invoice and photo that show construction began on or before June 30, 2026.
• Ask your engineer which ASHRAE standard applies. The answer changes if the building is placed in service after December 31, 2026.
• Check the 3-year look-back. A previous owner’s deduction lowers your ceiling.
• Model the basis reduction against any cost segregation study you commission.

If you are a homeowner or landlord with solar or a heat pump:

• Landlord: 25D was not available on the rental. Whether a business credit applies is a question about the facility and its dates.
• Homeowner with a 2025 credit you could not use: find line 16 on your 2025 Form 5695 and carry it forward.
• Rental income: credits and deductions interact with rental income tax and the passive loss limits; a credit you cannot use this year may carry.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 28, 2026: IRS, FAQs for modification of sections 25C, 25D, 25E, 30C, 30D, 45L, 45W and 179D under Public Law 119-21 (FS-2025-05, August 21, 2025); 26 U.S.C. 45L, 179D and 25D (Legal Information Institute, Cornell Law School); Public Law 119-21, sections 70506, 70507, 70508 and 70513 (govinfo.gov); Instructions for Form 8908 (Rev. December 2025); Instructions for Form 7205 (12/2025); the IRS pages on the credit for builders of energy-efficient homes (reviewed June 27, 2026), the energy efficient commercial buildings deduction (reviewed October 27, 2026), the residential clean energy credit (reviewed July 4, 2026) and About Form 8908 (reviewed September 29, 2026); Rev. Proc. 2025-32, section 4.25; Notice 2006-52, section 4.02; and IRS Statistics of Income, Publication 4801, 2023 Individual Income Tax Returns Line Item Estimates (Form 5695). Averages, sums, the 48-unit and 100,000 square foot examples and the July 4, 2026 date are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.