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45L Energy Efficient Home Tax Credit:  
Can I claim It?

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DIAGNOSTICS
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The §45L tax credit, sometimes known as the Energy Efficient Home Credit, has been extended to new home construction projects through December 31, 2020. Under the law, you may qualify for a tax credit if your residence meets certain new construction and efficiency requirements. 

How do you know if your home is efficient enough to qualify? The only way to know for sure is to have an independent, qualified agent such as Energy Diagnostics evaluate your home. But we can help you understand just what is entailed in the credit.

What is the Energy Efficient Home Credit?

Energy Efficient Home in Northwest Indiana at Dusk

This credit is described in §45L of the Internal Revenue Code, so it is sometimes called the 45L tax credit. (We’ll refer to the credit as the 45L tax credit in the remainder of this article.)

It allows eligible developers or contractors to claim a credit of $2,000 per new home or newly reconstructed home that meets certain efficiency standards.

Who Can Claim the 45L Tax Credit?

Under this law, it's important to know whether you qualify as an "eligible contractor." Basically, you are an eligible contractor if you paid to have the home built or rehabilitated. 

That means, even if you hired a contractor to rebuild your home, you are still considered the contractor. This also applies to developers who build whole subdivisions according to plans that meet the energy efficiency specifications.

What Homes Qualify For the 45L Tax Credit?

To qualify, your home must meet a few requirements:

  • Be located in the United States
  • Be no more than three stories tall above grade (i.e., above ground)
  • Be acquired for use as a residence prior to 2021

"Acquired" means sold or leased. In other words, this credit applies if you remodeled a home in order to sell it or if you remodeled an apartment building, but not if you simply wanted a new, energy-efficient kitchen.

The good news for remodelers is that there are separate tax credits for sustainable improvements to your home, such as the residential energy property credit and the renewable energy tax credit.

How To Claim the 45L Tax Credit

How do I claim the 45L tax credit? In order to take advantage of this credit, you must have a qualified, independent agent verify and certify that your home meets the requirements. The agent will use IRS-approved software for this process and provide you with official certification if the residence meets the standards.

Once your residence is certified, you can claim the credit with IRS Form 8908, Energy Efficient Home Credit. You will not be required to submit the certification, but you should keep it on file so you can produce it if required.

What are the Energy Efficiency Requirements under 45L?

This part gets pretty technical, so you can be thankful that it's someone else's job to do the certifying. The standards for energy-efficient home construction are set by the International Energy Conservation Code (IECC) of 2006, and the standards for energy-efficient appliances are governed by the Department of Energy regulations established under the National Appliance Energy Conservation Act of 1987.

There are IRS-approved apps that an inspector will use to make sure your residence checks all the necessary boxes.

You Can Apply Your Credit to Other Tax Years

Energy-Efficient Blue and Gray Concrete House in Northwest Indiana

While we only take care of the certification side of things, it's worth talking to your accountant or tax lawyer about whether you can spread out your credit over several years. For instance, if you own a multi-unit residence and qualify for a credit that brings your total tax liability below the Alternative Minimum Tax for that year, you do not have to lose the rest of your credit. Instead, you may be able to have it applied retroactively to the previous year and carried forward as much as 20 years.

Contact Energy Diagnostics to Claim Your Tax Savings

If you're beginning new home construction or rehabilitation—or even considering it—Energy Diagnostics can help you optimize for energy efficiency and navigate the sometimes complicated new world of sustainability.

We've rated and inspected over 60,000 homes in Illinois, Indiana, and Michigan, and we even conduct IECC trainings for homebuilders. 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—or to schedule an appointment.

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