Section 45L Energy Efficient Home Credit

The Section 45L Energy Efficient Home Credit is a federal tax incentive aimed at promoting the construction and acquisition of energy-efficient residential properties. Established under the Energy Policy Act of 2005 and extended through subsequent legislation, including the Inflation Reduction Act of 2022, this credit offers financial benefits to eligible contractors and builders who meet specific energy efficiency standards.

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01.

Eligibility Criteria

  • Eligible Contractors: The credit is available to eligible contractors, defined as the person or entity that constructed or manufactured the qualified energy-efficient home. In the case of manufactured homes, this includes the producer of such homes.
  • Qualified Homes:
    • Single-Family Homes: Must meet or exceed the energy efficiency requirements set by the ENERGY STAR Single-Family New Homes Program.
    • Manufactured Homes: Must comply with the ENERGY STAR Manufactured Home Program requirements.
    • Multifamily Units: Must adhere to the ENERGY STAR Multifamily New Construction Program standards.
02.

Credit Amounts

  • Single-Family and Manufactured Homes:
    • $2,500 for homes meeting ENERGY STAR program requirements.
    • $5,000 for homes certified as Zero Energy Ready under the Department of Energy’s program.
  • Multifamily Units:
    • $500 per unit for units meeting ENERGY STAR Multifamily New Construction standards.
    • $1,000 per unit if prevailing wage requirements are met.
03.

Recent Updates

The Inflation Reduction Act of 2022 extended and expanded the 45L tax credit through 2032, introducing higher credit amounts and aligning the qualifying criteria with updated ENERGY STAR and Zero Energy Ready Home program requirements.

04.

Application Process

  • Certification: Obtain certification from an accredited third-party verifier confirming that the property meets the requisite energy efficiency standards.
  • Documentation: Maintain comprehensive records, including certification documents and proof of compliance with ENERGY STAR or Zero Energy Ready Home requirements.
  • Tax Filing: Claim the credit by completing IRS Form 8908, “Energy Efficient Home Credit,” and submitting it with your federal tax return for the year in which the property is acquired by a homeowner or leased.
05.

Additional Considerations

  • Basis Adjustment: The basis of the property must be reduced by the amount of the credit claimed.
  • Prevailing Wage Requirements: For multifamily units, higher credit amounts are available if prevailing wage requirements are satisfied during the construction or rehabilitation of the property.
  • Program Versions: Ensure that the property complies with the specific version of the ENERGY STAR or Zero Energy Ready Home program applicable at the time of acquisition, as requirements may evolve over time.

For more detailed information and the latest updates, refer to the IRS Credit for Builders of Energy Efficient Homes page and the ENERGY STAR Section 45L Tax Credit for Home Builders page.

Note: Tax laws are subject to change. Consult with a tax professional to understand how the Section 45L Energy Efficient Home Credit applies to your specific situation