45L Energy Efficient Home Tax Credit
What is the Energy Efficient Home Credit?
The §45L Energy Efficient Tax Credit is a federal tax incentive that promotes the construction of energy efficient residential buildings. Available to builders and developers whose projects meet the qualifying criteria, this $2,000 tax credit per dwelling unit can yield significant returns.
Who qualifies to receive this credit?
The person claiming the 45L credit on their tax return must own and have a basis in the qualifying project during its construction. A "person" can be an individual, a trust, an estate, a partnership, an association, a company, or a corporation. Most entities currently claiming the 45L credit are homebuilders and developers.
The IRS terminology refers to this person as an “Eligible Contractor”. This is sometimes confusing as the credit is available to the person who financed and owned the project during construction, not the third-part contractor(s) who were paid to build it.
A key requirement of the tax credit is the sale (close of escrow) or lease (executed lease/rental agreement) of the home or dwelling units during the taxable year the credit is claimed. The credit is typically not available to a person eventually residing in the home.
IRS Form 8908 is used to claim the 45L tax credit
Project Requirements for Eligibility
To qualify for the $2,000 45L tax credit, an eligible dwelling must:
- Be located in the United States
- Be no more than three stories above grade
- Be acquired for use as a residence prior to 2021
- Be at least 50% more efficient than the 2006 IECC benchmark
- Have the energy features verified by a qualified HERS rater, such as Energy Diagnostics
- Compliance must be verified with DOE approved 45L software
- Be sold or leased prior to January 1, 2022
What kind of Buildings qualify?
- Single-family homes
- Manufactured and mobile homes (some limitations apply)
- Multi-family apartment and condominium buildings 3 stories above grade or less
- Student housing 3 stories above grade or less
- Substantial reconstruction or rehabilitation (some restrictions apply)
How To Claim the 45L Tax Credit
- The contractor must obtain verification of energy-efficient home qualifications from an accredited RESNET certifier. The certifier will do on-site testing and computer modeling to create and deliver a certification package. This certification package gives the applicant everything needed to file for the 45L tax credit.
Can I Certify My Own Project?
- No. Even if you are an authorized and eligible certifier, you cannot check your own units, and neither can anyone related to you. You must hire a qualified certifier to verify any project for which you intend to claim the 45L tax credit.
What Is An Eligible Certifier?
- An eligible certifier is a person that is not related to the eligible contractor and has been accredited or otherwise authorized by RESNET to use energy performance measurement methods approved by RESNET.
The credit can be claimed retroactively
The 45L tax credit can be claimed retroactively on qualifying projects for which this credit was not claimed on previous years' tax filings. Energy Diagnostics can provide certification requirements, but we encourage you to consult with your tax accountant to ensure your building meets the eligibility requirements for filing.
claiming the $2,000 energy efficient tax credit
In order to determine if your project qualifies for the 45L tax credit, we will just need some basic information about the building in order to verify eligibility.
We've rated and inspected over 60,000 homes throughout the Midwest. We'll help you plan ahead so you can save money during construction and save in taxes afterward.
Contact us today for questions about the 45L tax credit.