Instructions for Form 7205

Instructions for Form 7205

(Rev. December 2025)

Use With the December 2023 Revision of Form 7205

Energy Efficient Commercial Buildings Deduction

Section references are to the Internal Revenue Code

unless otherwise noted.

Future Developments

For the latest information about developments related to

Form 7205 and its instructions, such as legislation

enacted after this form and instructions were published,

go to IRS.gov/Form7205.

What’s New

Termination date. P.L. 119-21, commonly known as the

One Big Beautiful Bill Act, terminated the section 179D

energy efficient commercial buildings deduction for

property the construction of which begins after June 30,

2026.

Reminders

Form 7205. For energy efficient commercial building

property placed in service after December 31, 2022,

continue to use the December 2023 revision of Form

7205. For qualifying property placed in service prior to

January 1, 2023, use the December 2022 revision of Form

7205.

Maximum deduction. For tax years beginning in 2025,

the maximum deduction is $0.58 per square foot at 25%

energy saving increasing at a rate of 2 cents per

percentage point increased to $1.16 per square foot at

54% energy savings (indexed for inflation).

For tax years beginning in 2026, the maximum

deduction is $0.59 per square foot at 25% energy saving

increasing at a rate of 2 cents per percentage point

increased to $1.19 per square foot at 55% energy savings

(indexed for inflation).

See the instructions for line 2, column (b).

General Instructions

Purpose of Form

Use Form 7205 to:

• Calculate and claim the deduction under section 179D

for qualifying energy efficient commercial building

property placed in service during the tax year,

• Identify yourself as a designer or the building owner,

• Provide information on the person performing the

certification, and

• Provide information on the person completing the

allocation.

Dec 19, 2025

Who Must File

Individuals and business entities that qualify to claim the

deduction for energy efficient property (EEP) placed in

service during the tax year must file Form 7205 to claim

the deduction.

General Information

The following changes from the Inflation Reduction Act of

2022 (IRA) may affect qualifying EEP placed in service

after December 31, 2022.

• Eligibility. Commercial building owners, as well as

designers of EEP installed on or in buildings owned by

specified tax-exempt entities are eligible. Specified

tax-exempt entities include government entities, Indian

tribal governments (section 30D(g)(9)), Alaska Native

corporations (section 3 of the Alaska Native Claims

Settlement Act), and organizations exempt from tax under

chapter 1.

• Increased deduction maximum. For projects meeting

local prevailing wage and apprenticeship requirements,

the applicable dollar values used in determining the

maximum deduction amount are multiplied by 5 (before

inflation adjustments).

• Elimination of the partial deduction and the interim

lighting rule. These aspects of the deduction

computation have been removed.

• Alternative deduction for energy efficient building

retrofit property (EEBRP). The section 179D deduction

for EEBRP is effective for property placed in service after

December 31, 2022, in tax years ending after this date, if

the property is placed in service pursuant to a qualified

retrofit plan established after this date. Section 179D

requires the energy use intensity (EUI), defined later, of

the building on or in which EEBRP is installed be certified

by a qualified professional as of any date more than 1 year

after the date the retrofit property is placed in service.

Because of this requirement, the section 179D deduction

for EEBRP is not available in tax years ending on or before

December 31, 2023.

• Building lifetime maximum deduction amount.

Under prior law, all prior section 179D deductions for a

building were counted towards the maximum deduction

for the building. For property placed in service after

December 31, 2022, only the section 179D deductions

claimed in the prior 3 years (4 years for an allocated

deduction) are counted towards the maximum deduction

for the building.

Additional Information

For more information, see section 179D. Also, see the

following.

• Notice 2006-52, 2006-26 I.R.B. 1175, available at

IRS.gov/irb/2006-26_IRB#NOT-2006-52.

Instructions for Form 7205 (Rev. 12-2025) Catalog Number 93340H

Department of the Treasury Internal Revenue Service www.irs.gov

• Notice 2008-40, 2008-14 I.R.B. 725, available at

IRS.gov/irb/2008-14_RB#NOT-2008-40.

• Notice 2012-26, 2012-17 I.R.B. 847, available at

IRS.gov/irb/2012-17_IRB#NOT-2012-26.

• Announcement 2023-1, 2023-3 I.R.B. 422, available at

IRS.gov/irb/2023-03_IRB#ANN-2023-1; supplemented

and superseded by Announcement 2024-24, 2024-24

I.R.B. 1675 (or any successor), available at IRS.gov/irb/

2024-24_IRB#ANN-2024-24.

Definitions

Energy efficient property (EEP). This is property that is

either:

• Energy efficient commercial building property (EECBP),

or

• Energy efficient building retrofit property (EEBRP).

EECBP is property that meets the following criteria.

• Is depreciable property.

• Is installed on or in a building located in the United

States, and within the scope of Reference Standard 90.1

(defined below).

• Is installed as part of the interior lighting systems,

heating, cooling, ventilation, and hot water systems, or the

building envelope.

• Is certified as being installed as part of a plan designed

to reduce the total annual energy and power costs with

respect to the interior lighting systems, heating, cooling,

ventilation, and hot water systems of the building by 25%

or more in comparison to a reference building which

meets the minimum requirements of Reference Standard

90.1.

EEBRP is property installed pursuant to a qualified

retrofit plan that meets the following criteria.

• Is depreciable.

• Is installed on or in any qualified building.

• Is installed as part of the interior lighting systems,

heating, cooling, ventilation, and hot water systems, or the

building envelope.

• Is certified by a qualified professional as being installed

according to such plan.

See section 179D(f)(4) for additional requirements.

Reference Standard 90.1. This standard means, with

respect to any property, the more recent of (a) Standard

90.1-2007 published by the American Society of Heating,

Refrigerating, and Air Conditioning Engineers and the

Illuminating Engineering Society of North America; or (b)

the most recent Standard 90.1 published by the American

Society of Heating, Refrigerating, and Air Conditioning

Engineers and the Illuminating Engineering Society of

North America for which the Department of Energy has

issued a final determination and which has been affirmed

by the Secretary, after consultation with the Secretary of

Energy, not later than the date that is 4 years before the

date that such property is placed in service. See

Announcement 2024-24 for the applicable reference

standard.

Building square footage. This is the sum of the floor

areas of the conditioned spaces within the building,

including basements, mezzanine, and

intermediate-floored tiers; and penthouses with headroom

height of 7.5 feet or greater. Building square footage is

measured from the exterior faces of exterior walls or from

2

the centerline of walls separating buildings, but excludes

covered walkways, open roofed-over areas, porches and

similar spaces, pipe trenches, exterior terraces or steps,

chimneys, roof overhangs, and similar features.

Special Rules

Qualified individual. A certification completed by a

qualified individual is required for both building owners

and designers to claim the EECBP deduction. The

certification must meet the requirements specified in

Notice 2006-52, Section 4.

A qualified individual is an individual that:

• Is not related to the person or entity claiming the

deduction;

• Is an engineer or contractor that is properly licensed as

a professional engineer or contractor in the jurisdiction in

which the building is located; and

• Has represented in writing that he or she has the

requisite qualifications to provide the certification required

under Notice 2006-52, Section 4, or to perform the

inspection and testing described in Notice 2006-52,

Section 4.05.

Qualified professional. A certification completed by a

qualified professional is required for both building owners

and designers to claim the EEBRP deduction. The

certification is done as part of a qualified retrofit plan as

provided in section 179D(f)(2). A qualified professional

(for EEBRP only) is an individual who is a licensed

architect or a licensed engineer and has the credential to

create the qualified retrofit plan and perform the

certifications required to obtain the EEBRP deduction.

Designer. An allocation of the EECBP deduction to the

designer of a building owned by a specified tax-exempt

entity must be in writing and meet the requirements of

Notice 2008-40, Section 3.04, in order for the designer to

claim the deduction. See Designer of energy efficient

property (EEP) for additional requirements.

Increased deduction amount. Taxpayers that satisfy

the prevailing wage and apprenticeship requirements with

respect to an installation of EEP (or property installed

pursuant to a qualified retrofit plan) may claim an

increased deduction amount. You may also be eligible to

claim the increased deduction amount if the installation of

the EEP (or property installed pursuant to a qualified

retrofit plan) began before January 29, 2023.

Prevailing wage requirements. To satisfy the

prevailing wage requirements with respect to any EEP (or

property installed pursuant to a qualified retrofit plan), you

must ensure that any laborers and mechanics employed

by you or any contractor or subcontractor in the

installation of the property are paid wages at rates not less

than the prevailing rates for construction, alteration, or

repair of a similar character in the locality in which such

facility is located as most recently determined by the

Secretary of Labor (according to subchapter IV of

chapter 31 of title 40, U.S. Code).

Apprenticeship requirements. To satisfy the

apprenticeship requirements with respect to any EEP (or

property installed pursuant to a qualified retrofit plan), you

must ensure that, with respect to the installation of the

property, not less than the applicable percentage of the

Instructions for Form 7205 (Rev. December 2025)

total labor hours of the installation, construction,

alteration, or repair work (including such work performed

by any contractor or subcontractor) with respect to such

property is, subject to section 45(b)(8)(B), performed by

qualified apprentices (apprenticeship labor hour

requirements).

If the increased deduction amount criteria are met

because the prevailing wage requirement and the

applicable apprenticeship requirements are met, complete

Form 7205 to claim the increased deduction amount for

EEP placed in service during the tax year. Attach a

statement to your timely filed income tax return (including

extensions). The statement should include information to

establish that you satisfy the prevailing wage and

apprenticeship requirements.

You must maintain and preserve sufficient records,

including books of account or records for work performed

by laborers to install the property, to establish that you

satisfied the prevailing wage and apprenticeship

requirements to claim the increased tax benefit.

See the instructions for line 1, column (d). For more

information on the prevailing wage and apprenticeship

requirements, see Notice 2022-61, 2022-52 I.R.B. 560,

available at IRS.gov/irb/2022-52_IRB#NOT-2022-61, and

final regulations, Increased Amounts of Credit or

Deduction for Satisfying Certain Prevailing Wage and

Registered Apprenticeship Requirements (TD 9998),

available at federalregister.gov/documents/

2024/06/25/2024-13331/increased-amounts-of-credit-ordeduction-for-satisfying-certain-prevailing-wage-andregistered. Also, see IRS.gov/

PrevailingWageandApprenticeshipFAQs.

Specific Instructions

If claiming the deduction for more than four properties,

complete and attach as many Forms 7205 as needed to

list the properties. However, complete Part II, line 3 (for

total section 179D deduction), on only one Form 7205.

The line 3 amount on that form should include the

combined total for all properties reported on all Forms

7205. See the instructions for Part II, line 3.

Who Is Claiming the Deduction

At the top of Form 7205, check the status that applies to

the person claiming the deduction. Check only one

status.

Building owner. Check the “Building owner” box if you

are the owner of the building and are claiming the

deduction for qualifying property installed on or in your

building.

Designer of energy efficient property (EEP). If EEP is

installed on or in property owned by a specified

tax-exempt entity, the deduction may be allocated to the

person primarily responsible for designing the property in

lieu of the owner of such property. Check the “Designer”

box if all the following are true.

• You are the person primarily responsible for designing

the EEP (the designer).

• You created the technical specifications for installation

of the EEP on or in property owned by the specified

Instructions for Form 7205 (Rev. December 2025)

tax-exempt entity. A person that merely installs, repairs, or

maintains the property is not a designer.

• The specified tax-exempt entity building owner provided

you a written statement allocating the deduction to you.

If a deduction is allowed under section 179D with

respect to any EECBP, the basis of such property shall be

reduced by the amount of the deduction so allowed. The

building owner must reduce the basis of the EECBP by the

amount of the section 179D deduction allocated.

Part I—Building and EEP Information

Line 1, Column (a)

Enter the name, street address, city or town, state, and

ZIP code of building(s) on or in which the EEP is installed.

Keep buildings separated on lines A, B, C, and D.

Line 1, Column (b)

Enter the date the property was placed in service.

Line 1, Column (c)

Enter the appropriate percentage (rounded to two decimal

places):

• Energy savings percentage for the applicable

building systems, computed using the Performance Rating

Method (PRM), as specified in Notice 2006-52; or

• Energy use intensity (EUI) reduction for a building on

or in which EEBRP is installed expressed as energy per

square foot per year. EUI is calculated by dividing the total

energy consumed by the building in one year (measured

in kBtu) by the building square footage.

Line 1, Column (d)

Check the box in column 1(d) only if the following criteria

for the increased deduction amount are met.

• Installation of EEP (or property installed pursuant to a

qualified retrofit plan) began prior to January 29, 2023; or

• Laborers and mechanics employed by you or any

contractor or subcontractor in the installation of EEP (or

property installed pursuant to a qualified retrofit plan) are

paid wages at rates not less than the prevailing rates for

construction, alteration, or repair of a similar character in

the locality in which such EEP is located as most recently

determined by the Secretary of Labor; and

• Any applicable apprenticeship requirements are met.

For more information regarding the prevailing wages

and apprenticeship requirements, see Notice 2022-61 and

TD 9998. Also, see Increased deduction amount, earlier.

Line 1, Column (e)

Check the box in column 1(e) only if EEBRP was installed

on or in the building under a qualified retrofit plan. If both

EECBP and EEBRP were installed on or in the same

building, enter the EECBP information on a separate line.

For example, enter EEBRP information for Building 1 on

line 1A and EECBP information for Building 1 on line 1B.

Line 1, Column (f)

Use the Worksheet for Form 7205, Line 1, Column (f) to

compute the total potential amount per square foot. Each

building has a maximum amount per square footage limit

for the 3 tax years immediately preceding the current tax

3

year. For a building where the deduction is appropriately

allowable to a person other than the building owner, the

building’s maximum amount for square footage limit

applies to the 4-tax-year period immediately preceding the

current tax year. Once the limit is reached, no further

section 179D deductions may be taken for the building

during the applicable period. See the instructions for

line 2, column (b), later, for the maximum amount allowed.

Tax year

Maximum full

amount allowed

Maximum partial

amount allowed

All years beginning

before January 1,

2021

$1.80

$0.60

For tax years

beginning on or after

January 1, 2021

$1.82

$0.61

Line 1, Column (g)

For tax years

beginning on or after

January 1, 2022

$1.88

$0.63

Maximum amount

allowed—line 1(d)

checked

Maximum amount

allowed—line 1(d)

not checked

For tax years

beginning on or after

January 1, 2023

$5.36

$1.07

For tax years

beginning on or after

January 1, 2024

$5.65

$1.13

For tax years

beginning on or after

January 1, 2025

$5.81

$1.16

For tax years

beginning on or after

January 1, 2026

$5.94

$1.19

Enter the building square footage for the property. See the

definition of building square footage, earlier.

Part II—Computation of Energy

Efficient Commercial Buildings

Deduction Amount

Line 2, Column (a)

Enter the total per square foot dollar amount that was

claimed for the building in the prior 3 (or 4, if applicable)

tax years. The total amount for the building includes the

amount you claimed, and amounts claimed by others,

including previous owners of the building.

1. Enter the total deduction for the building claimed

in the prior 3 tax years* by you and/or any other

parties . . . . . . . . . . . . . . . . . . . . . . . . .

2. Enter the amount from Form 7205, line 1,

column (g) for the building . . . . . . . . . . . . .

3. Divide line 1 by line 2. Enter this amount on Form

7205, line 2, column (a) . . . . . . . . . . . . . . .

*Use a 4-tax-year period if the deduction is

allowable to the designer.

1.

2.

3.

Line 2, Column (b)

Subtract line 2, column (a), from the maximum full amount

allowed (from the chart below) for the tax year.

The maximum amount allowed each year is as follows.

The maximum amounts allowed may be adjusted for

inflation. Inflation adjustment amounts are available at

IRS.gov/Newsroom/Inflation-Adjusted-Tax-Items-by-TaxYear. Select the applicable tax year’s news release, then

click the Revenue Procedure link and search for “section

179D” to see the maximum amount allowed for the tax

year.

Line 2, Column (d)

If line 2, column (c), is checked, enter the amount from

line 1, column (h); skip line 2, columns (e) and (f); and go

to column (g). If line 2, column (c), is not checked, enter

zero on line 2, column (d); and go to line 2, column (e).

Line 2, Column (g)

Enter the cost of EEP placed in service during the tax

year. The cost of EEP does not include the total cost of the

building or general renovation. It is limited to the cost of

the building systems that make up the EEP. See the

definition of EEP, earlier. EEP does not include property

such as ovens and fryers, manufacturing equipment,

elevators or escalators, or exterior lighting.

If you are a building owner with a partial building

ownership, refer to your ownership or lease agreement to

determine how the expense is to be allocated among the

owners. Only enter your allocated portion of the cost of

EEP placed in service during the year.

Line 2, Column (h)

In column (h), enter the greater of column (d) or column

(f). If you are a building owner with a partial building

ownership, refer to your ownership or lease agreement to

determine how the amount should be allocated among the

owners. Only enter your allocated portion of the computed

4

Instructions for Form 7205 (Rev. December 2025)

amount per square foot in column (h). It will generally be

your allocated percentage, as defined in the ownership

agreement, multiplied by the greater of column (d) or

column (f).

Line 2, Column (j)

Designers. If you are claiming the deduction as the

designer of EEP, you may only claim the amount the

specified tax-exempt entity building owner has allocated

to you on the appropriate allocation documents. Enter the

dollar amount allocated to you as designer on line 2,

column (j).

Line 3. Total Section 179D Deduction

Add the amounts in line 2, column (k). Enter the total on

line 3. Also, include the total on the applicable line of your

tax return. For example, if filing Form 1120, include the

total on line 25. Attach Form 7205. See the instructions for

your tax return.

If you are claiming the deduction for more than four

properties, complete as many Forms 7205 as needed to

list them. However, complete line 3 on only one form. That

line 3 amount should include the combined total of all

properties reported on all Forms 7205.

Part III—Certification Information for

Each Property Listed in Part I

Enter the information regarding the qualified individual

who completed the certification for each claimed property.

See Qualified individual, earlier. If box 1(e) of Part I is

checked, enter the information regarding the qualified

professional who completed the qualifying final

certification for the property. See Qualified professional,

earlier.

Part IV—Designer Allocation

Information for Each Property Listed

in Part I

Complete this section only if you checked the Designer

box at the top of the Form 7205.

Enter the information regarding the specified

tax-exempt entity building owner and the individual

completing the allocation form.

Worksheet for Form 7205, Line 1, Column (f) (complete for each

building)

Keep for Your Records

This worksheet figures the total potential amount per square foot for tax years beginning on or after January 1, 2025. See

the instructions for line 1, column (f).

1.

Enter the percentage from Part I, line 1(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2a.

2b.

If the percentage is less than 25%, STOP; you cannot claim the deduction for this building. If

the percentage is 25% or greater, enter the percentage as a decimal, rounded to two

decimal places (for example, 26.22% enter as “0.26”) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtract 0.25 from line 2a and enter the result here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2c.

Multiply line 2b by 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2d.

Add 0.58 to line 2c and enter the result as a dollar amount (for example, 1.03, enter as

$1.03) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

If the amount on line 2d is greater than $1.16, enter $1.16. Otherwise, enter the amount

from line 2d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

If the box on Form 7205, line 1, column (d), is checked, enter the amount from line 2b of this

worksheet here. If the box on Form 7205, line 1, column (d), is not checked, skip to line 5

and enter the amount from line 3 of this worksheet on line 5 . . . . . . . . . . . . . . . . . . . . . . . .

Multiply line 4a by 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

4a.

4b.

4c.

4d.

5.

Add 2.90 to line 4b and enter the result as a dollar amount (for example, 5.36, enter as

$5.36) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

If the amount on line 4c is greater than $5.81, enter $5.81. Otherwise, enter the amount

from line 4c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

If the box on Form 7205, line 1, column (d), is checked, enter the amount from line 4d of this

worksheet here. If the box on Form 7205, line 1, column (d), is not checked, enter the

amount from line 3 of this worksheet here. Also, enter the amount from line 5 on Form 7205,

line 1, column (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

2a.

2b.

2c.

2d.

3.

4a.

4b.

4c.

4d.

5.

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the

United States. You are required to give us the information. We need it to ensure that you are complying with these laws

and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act

unless the form displays a valid OMB control number. Books or records relating to a form, or its instructions, must be

retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax

returns and return information are confidential, as required by section 6103.

Instructions for Form 7205 (Rev. December 2025)

5

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden

for all other taxpayers who file this form is shown below.

Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 min.

Preparing, copying, assembling, and sending the form to the IRS . . 10 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,

we would be happy to hear from you. You can send us comments from IRS.gov/FormComments. Or, you can write to the

Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.

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Instructions for Form 7205 (Rev. December 2025)