How to Fill Out and File Form 7205: Parts I–IV and the June 2026 Cutoff

To fill out Form 7205, you work through four parts in order: Part I identifies each building and the energy-efficient property installed, Part II computes the deduction using the square-footage rate and the rolling per-building cap, Part III captures the qualified certifier’s information, and Part IV is completed only if you are a designer claiming through an allocation from a tax-exempt building owner. You attach the completed form to your timely filed income tax return, including extensions.¹ One deadline to keep in view before you start: the One Big Beautiful Bill Act terminated Section 179D for property whose construction begins after June 30, 2026.²

What You Need Before You Start

You cannot complete this form from memory or from cost records alone. Pull the following together first:

The building name, full street address, and square footage.
The date the energy-efficient property was placed in service.
The signed energy certification from a qualified individual, showing the energy savings percentage (or, for a retrofit, the energy use intensity reduction).
The certifier’s name, employer, address, and telephone number for Part III.
The actual cost of the energy-efficient property placed in service during the tax year.
Any 179D deduction amounts already claimed for the same building in the prior three tax years (four years if you are a designer claiming through an allocation).
Documentation that prevailing wage and apprenticeship (PWA) requirements were met, if you are claiming the 5x rate.
The signed allocation letter, if you are a designer claiming for a government or tax-exempt building.

The certification is not optional. Without a written certification from a licensed professional engineer or contractor in the state where the building sits (a licensed architect or engineer for retrofit property), the IRS will disallow the deduction.³ The certifier cannot be related to the taxpayer, must confirm the specific percentage of energy savings, and must have used software approved by the Department of Energy for the applicable Performance Rating Method.⁴

Part I: Building and Energy-Efficient Property Information

Part I has room for up to four buildings on lines A through D. For each building you complete seven columns.¹

Column (a): the building name and full street address.
Column (b): the date the energy-efficient property was placed in service.
Column (c): the energy savings percentage from the certification, rounded to two decimal places. For retrofit projects, enter the energy use intensity (EUI) reduction instead.
Column (d): check this box only if PWA requirements were met, or if installation began before January 29, 2023.
Column (e): check this box only if the property is energy-efficient building retrofit property installed under a qualified retrofit plan.
Column (f): the potential deduction amount per square foot, calculated using the worksheet in the instructions.
Column (g): the building’s square footage.

If the same building has both standard energy-efficient property and retrofit property, report them on separate lines. The retrofit goes on one line (say, 1A) and the standard property on another (1B).

Part II: Computation of the Deduction Amount

Part II is where the number gets fixed. For each building listed in Part I, you complete the following columns.¹

Column (a): the total per-square-foot amount already claimed for this building in the prior three tax years (four years if you are a designer claiming through an allocation). This enforces the rolling per-building cap.
Column (b): subtract column (a) from the maximum allowed for the current tax year. For tax years beginning in 2026, that ceiling is $5.94 per square foot if PWA requirements are met, or $1.19 if they are not. For 2025 property, the range runs from $0.58 to $1.16 per square foot at the base rate and $2.90 to $5.81 per square foot at the PWA rate, depending on the energy savings percentage.⁵
Column (g): the actual cost of the energy-efficient property placed in service during the tax year.
Column (h): the deduction amount, which is the lesser of the square-footage-based figure and the actual cost of the property. You cannot deduct more than you spent.

Line 3 totals the deduction amounts from all buildings. That total is the figure you carry to your income tax return.

Designers claiming through an allocation also enter the allocated amount in Part II, column (j).

How the Rate in Column (b) Is Set

The statutory base rate starts at $0.50 per square foot at 25 percent energy savings and rises $0.02 for each additional percentage point, capping at $1.00 per square foot at 50 percent savings. If PWA requirements are met, the figures multiply by five: $2.50 at 25 percent savings, rising $0.10 per point, up to $5.00 at 50 percent.⁶ The IRS then adjusts those figures annually for inflation, which is where the 2025 and 2026 numbers above come from. Use the worksheet in the Form 7205 instructions for your specific tax year to land on the correct per-square-foot rate.

If You Are Claiming the 5x PWA Rate

Checking the PWA box in Part I, column (d) commits you to two labor standards during installation. Prevailing wage means every laborer and mechanic on the installation, whether working for you, a contractor, or a subcontractor, is paid at rates no less than the prevailing wage determined by the Department of Labor under Davis-Bacon for that work in that geographic area.⁷ Apprenticeship has three prongs: at least 15 percent of total labor hours performed by qualified apprentices from a registered program; the program’s apprentice-to-journeyworker ratio maintained each day apprentices are on site; and any employer with four or more workers on the project employing at least one qualified apprentice. Apprenticeship requirements apply only to work performed before the property is placed in service.

If you fall short on either requirement, a cure provision preserves the increased deduction through correction payments to underpaid workers plus a penalty of $5,000 per affected worker. For prevailing wage failures, you have 180 days after the IRS makes a final determination to pay. Intentional disregard triples the correction payment and doubles the penalty.⁸

The one exception to all of this: if construction or installation began before January 29, 2023, the 5x rate applies automatically without meeting the labor standards, and you still check the box in column (d).¹

Part III: Certification Information

For each building, enter the name, employer, address, and telephone number of the qualified individual who performed the energy savings certification. If the building involved retrofit property, provide instead the information for the qualified professional (a licensed architect or engineer) who completed the qualifying final certification for the retrofit.

Part IV: Allocation Information for Designers

Part IV applies only when a government entity, tribal government, or tax-exempt organization has allocated its 179D deduction to a designer, typically the architect, engineer, or contractor who created the energy-efficient specifications. Enter the name, address, and telephone number of the authorized person who signed the allocation letter. If you are claiming as a building owner rather than through an allocation, leave Part IV blank.

If you are the designer, you also need the allocation letter itself on file. It must be signed by an authorized representative of the tax-exempt entity and should describe the project and building, list the designers involved, and specify how the deduction is divided among them.⁵ Get this signed early. The IRS will ask for it on audit, and government signatories are slow.

Retrofit Property: What Changes on the Form

If you check the retrofit box in Part I, column (e), three things shift. Column (c) holds the EUI reduction percentage rather than the energy savings percentage. The certifier in Part III must be a licensed architect or licensed engineer; the “contractor” option available for standard projects does not apply. And the EUI reduction must be certified as of a date more than one year after the retrofit property is placed in service, meaning you cannot claim the deduction until that post-installation measurement period has passed.¹ The per-square-foot rates and PWA multiplier work the same way as for standard property.

Filing the Form and Keeping Records

Attach the completed Form 7205 to your timely filed income tax return, including extensions. The line 3 total goes to the appropriate line on the return you file: for example, line 25 on Form 1120 for corporations, Form 1065 for partnerships, or Form 1040 for individual filers. The IRS accepts the form through standard electronic filing systems, and paper filers should include it with their mailed return.

Keep supporting documents for at least three years after filing, the general IRS record retention period.⁹ Given the complexity of 179D claims, six or seven years is the more cautious approach. Hold the energy certification, software modeling reports, allocation letters, PWA documentation, and cost records together in one place. Energy modeling files are difficult to reconstruct after the fact.

The June 2026 Cutoff to Watch

Section 179D will not apply to property whose construction begins after June 30, 2026. The operative date is when construction begins, not when the property is placed in service, so a project that breaks ground before July 1, 2026 and finishes afterward can still qualify. Document the construction start date carefully. The Department of Energy has pointed to a safe harbor commonly used for similar construction-begins provisions, under which either physical work at the site or incurring at least five percent of total project cost establishes the start.¹⁰ For property already placed in service or well underway, the termination changes nothing about how you complete Form 7205 for the year of service.

1
Internal Revenue Service. Instructions for Form 7205
2
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21
3
Internal Revenue Service. Instructions for Form 7205
4
Department of Energy. Qualified Software for Calculating Commercial Building Tax Deductions
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Internal Revenue Service. Energy Efficient Commercial Buildings Deduction
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Office of the Law Revision Counsel. 26 US Code 179D – Energy Efficient Commercial Buildings Deduction
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Internal Revenue Service. Frequently Asked Questions About the Prevailing Wage and Apprenticeship Under the Inflation Reduction Act
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Federal Register. Increased Amounts of Credit or Deduction for Satisfying Certain Prevailing Wage and Registered Apprenticeship Requirements
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Internal Revenue Service. How Long Should I Keep Records?
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Department of Energy. 179D Energy Efficient Commercial Buildings Tax Deduction