Retail Owners: Last Chance for Huge Tax Savings Before 179D Ends in 2026!
Marc Perlof • September 22, 2025
Hey, Retail Real Estate Rockstars!
Property owners could lose tens of thousands in
federal tax savings on building upgrades starting July 2026. The Big Beautiful Law (H.R. 1) ends the
Energy Tax Deduction for Commercial Buildings (§ 179D). If you’ve been counting on tax savings for energy upgrades like HVAC, lighting, or windows, here’s what you need to know to plan smart.
What § 179D Gave You vs. What’s Changing
Before, § 179D let building owners (including retail landlords) take
tax deductions for energy-saving improvements, things like LED lighting, efficient HVAC systems, and better insulation or windows. These deductions often meant real money saved when making upgrades.
Now, under H.R. 1:
- Starting July 1, 2026, new construction or upgrade projects will no longer qualify for § 179D deductions¹.
- That means no tax savings for HVAC, lighting, or other energy upgrades if work begins after June 30, 2026.
- Projects already started before that date may still qualify.
Key Points
- The energy tax deduction (§ 179D) ends for projects that begin after June 30, 2026¹.
- Retail owners planning upgrades should move quickly to use the benefit before it disappears.
- Budgets, return on investment (ROI), and financial models need to be updated for this change.
Data You Should Know
- § 179D savings were often measured in dollars per square foot of upgrades across lighting, HVAC, and building envelope systems².
- The repeal impacts all commercial building owners starting new projects after mid-2026¹.
- For example, a $250,000 HVAC upgrade that qualified under § 179D could deliver $25,000–$50,000 in tax deductions, savings that disappear once the repeal takes effect.
- Without § 179D, payback periods could stretch longer with ROI dropping by 10–20% on similar projects².
What This Means for Your Property
If you’ve been planning energy-efficient upgrades and counting on § 179D:
- Your ROI will be lower — you’ll need to depend on state programs, utility rebates, or direct energy savings.
- Any deals assuming § 179D must be re-checked and adjusted.
- Getting upgrades done before June 30, 2026 can help maintain property value since future buyers won’t have this tax break.
If you’re a retail property owner looking at upgrades, whether for lighting, HVAC, windows, or insulation, this repeal changes the game. Let’s review your projects, see if they can begin in time to qualify, and adjust your cash flow plan. Call or DM me to map out your best move.
With § 179D ending on June 30, 2026, what upgrades will you push forward now and will they still hold value once the tax break is gone?
#179DRepeal #EnergyEfficientTaxDeduction #CommercialBuildingUpgrades
#TaxSavingsForHVACLighting #HR1EnergyTax
Footnotes & Sources
- H.R. 1, Sec. 70507: Termination of Energy Efficient Commercial Buildings Deduction — “This section shall not apply with respect to property the construction of which begins after June 30, 2026.”
- Historical § 179D allowed deductions in the range of dollars per square foot for energy-efficient commercial upgrades across lighting, HVAC, and building envelope systems.
Disclaimer
This post is for information only. It is not legal, tax, or financial advice. Always check with a licensed professional before making decisions.
© 2025 Marc Perlof Group. All rights reserved.
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Hey, Retail Real Estate Rockstars! The Big Beautiful Bill (H.R. 1) has completely changed the rules for State and Local Taxes (SALT), which is great news for any property owner who has ever cringed when they see their tax bill. For those of you investing in retail real estate, this is the kind of victory that calls for a double espresso and a fresh pro forma. We're talking about actual tax relief in 2025. Let's dissect it. What Just Happened? The SALT deduction cap, once stuck at $10,000 per household, has officially increased to $40,000 for joint filers and $20,000 for single filers — but only between 2025 and 2029. After that, it’s back to the old cap unless Congress re-ups¹. Important Clarification for Property Owners While the IRS frames the new SALT cap in terms of individual filers ($20,000 single / $40,000 joint), the impact depends on how your retail property is owned: LLCs, Partnerships, and S-Corporations (Pass-Throughs): Income, expenses, and property taxes flow through to the owners’ personal returns. The higher SALT cap allows greater deductions here, boosting post-tax cash flow for the individual owners. Trusts & Estates: Similar pass-through treatment, meaning beneficiaries or trustees may capture the benefit depending on structure. C-Corporations: The SALT cap generally doesn’t apply, since corporate taxes are calculated differently and deductions follow corporate rules. REITs (Public or Private): REITs have their own tax regime, but shareholders who receive pass-through income may benefit at the individual level. Direct Individual Ownership: If you hold the property in your own name, property taxes fall directly under the SALT deduction rules. If you live in a high-tax state like California, New York, or New Jersey, this means you can deduct a lot more of your state income, property, and local sales taxes on your federal returns. Why Retail Property Owners Should Care More Deductible Property Taxes You can lower your taxable income on your federal return by deducting a larger portion of your high property taxes on retail assets. Boosts Post-Tax Cash Flow Increased deductions = less tax paid = more cash in your pocket. Offsets Reassessment or NNN CAM Spikes With inflation and property tax reassessments squeezing margins, this SALT cap increase gives you some room to breathe¹. Attractive to High-Income Buyers New investors seeking tax efficiency may find your retail property more alluring if you offer larger deductions. Strategic Planning Window: 2025–2029 These changes expire after 2029, so use this window wisely — structure sales, 1031 exchanges, or renovations when you can best leverage the deduction bump¹. Real Data, Real Impact The original SALT cap from the 2017 Tax Cuts and Jobs Act was projected to cost Californians alone over $12 billion in lost deductions annually². Nearly 30% of households in high-cost areas maxed out the previous SALT deduction limit². What About NNN Leases? Here’s the twist: if your property is on a triple-net (NNN) lease, your tenants — not you — pay the property taxes. For Landlords: The SALT cap change doesn’t directly benefit you, since you aren’t the one writing the property tax check. For Tenants: They may be able to deduct more of those property taxes on their federal returns, depending on how their business or personal tax filings are structured¹. Smart Move: Share this info with your tenants. Suggested Subject Line for Tenant Email: “You May Benefit from New Tax Deduction Rules (H.R. 1)” A simple note saying, “The new federal tax law (H.R. 1) increased the SALT deduction cap for 2025–2029. Since you pay property taxes under your NNN lease, this may be relevant for your tax planning. Please confirm with your CPA.” That small gesture positions you as knowledgeable, supportive, and proactive — which builds goodwill and strengthens tenant relationships. If you’re considering a sale, refinance, or exchange between now and 2029, let’s talk strategy while this deduction window is wide open #RetailRealEstate #CommercialRealEstate #TaxStrategy #SALTdeduction #PropertyOwners
