This hypothetical building has 100,000 square feet, $1,000,000 of eligible cost, no prior claims, and a tax year beginning in 2026. Valid construction timing, ordinary-route certification, and all other requirements are assumed only to isolate the arithmetic.
The increased figures require PWA compliance or a valid exception. Every amount shown is a potential deduction before final review—not a refund or promised cash saving.
At 25%
The two published starting rates produce different preliminary amounts
Base: 100,000 SF × $0.59 = $59,000. Increased: 100,000 SF × $2.97 = $297,000.
The increased amount is close to five times the base amount, but the formulas use separately rounded values.
One building across four savings levels
Potential 2026 amounts for 100,000 SF before limits.
$0.59/SF
$2.97/SF
$0.89/SF
$4.77/SF
$1.19/SF cap
$5.94/SF cap
| Item | Value | Note |
|---|---|---|
| 25% · base | $59,000 | $0.59/SF |
| 25% · increased | $297,000 | $2.97/SF |
| 40% · base | $89,000 | $0.89/SF |
| 40% · increased | $477,000 | $4.77/SF |
| 55% · base | $119,000 | $1.19/SF cap |
| 55% · increased | $594,000 | $5.94/SF cap |
At 40%
Each formula applies its own increment
Fifteen points above 25 produce $0.89 base and $4.77 increased per square foot. The preliminary amounts are $89,000 and $477,000.
Area, tax year, eligible cost, and prior-claim assumption remain unchanged.
At 50% and 55%
The increased path caps before the base path
At 50%, base is $1.09 and increased is capped at $5.94, producing $109,000 and $594,000. At 55%, base reaches $1.19, producing $119,000, while increased remains $594,000.
This different cap behavior is why a simple base-times-five shortcut can be wrong.
Calculation sequence
The chart value is only the first amount.
100,000 SF
Supported area
Certified rate
Base or increased
Preliminary amount
Area × rate
Limits
Cost and prior claims
Labor gate
Only supported PWA compliance or a valid exception unlocks the increased path
Installation beginning before January 29, 2023 may qualify for the applicable exception. Otherwise, prevailing wage, apprenticeship, contractor, subcontractor, and recordkeeping rules require review.
The base path remains available for analysis without PWA, subject to every other Section 179D requirement.
Amount limits
Eligible cost can cap both scenarios
If eligible cost were only $80,000 at 40% savings, both the $89,000 base preliminary amount and $477,000 increased preliminary amount would be limited to $80,000, assuming no other limit.
Prior deductions can impose a separate limit. The preparer should reconcile claimant-specific three- and four-year rules rather than promise an automatic reset.
CPA handoff
Separate deduction, basis adjustment, and cash tax
The final allowed deduction reduces taxable income and generally reduces basis in qualifying property. It is not a dollar-for-dollar payment.
Give the CPA the assumptions, certification, labor conclusion, eligible-cost schedule, prior-claim reconciliation, and current forms—not only the largest chart value.
Eligible-cost sensitivity at 40%
A cost cap can override either preliminary path.
| Review point | Evidence or measure | Why it matters |
|---|---|---|
| $1,000,000 eligible cost | $89,000 / $477,000 | Base / increased preliminary amounts, assuming no other limit. |
| $80,000 eligible cost | $80,000 / $80,000 | Both limited to assumed eligible cost, before other limits. |
Prepare the review
Keep every assumption visible
- Tax year beginning in 2026
- 100,000 supported square feet
- Certified savings percentage
- Base or increased path
- PWA compliance or exception
- Eligible cost
- Prior building deductions
- Construction-start evidence
- Placed-in-service evidence
- Basis and return treatment
Continue the review
Common questions
Practical answers before the review
Why do the rates not stay exactly fivefold?
The published formulas use separately rounded increments and different cap points.
Can eligible cost cap both scenarios?
Yes, as the hypothetical $80,000 cost case illustrates, subject to project facts and other limits.
Is $594,000 a guaranteed tax saving?
No. It is a hypothetical potential deduction before limits, not a credit or cash-tax result.