Claim the 45L Tax Credit for Energy Efficient Homes
Find out more about the 45L energy efficient home credit, and how Tri-Merit can help you make a claim.
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The Inflation Reduction Act extends the 45L Tax Credit for energy-efficient residential construction through 2032.
Inflation Reduction Act significant changes:
- Properties must be certified through Energy Star Programs to be eligible
- Starting in 2023 through 2032, credits range from:
- $2,500 to $5,000 per single-family home
- Manufactured homes, and $500 to $5,000 per multifamily dwelling unit.
- For the maximum credit, properties must meet the following:
- Zero Energy Ready Home program and prevailing wage requirements.
- *All residential developments can qualify to start in 2023. No longer just three stories or less, low-rise.
- In certain partnership entities, the Tax Credit is transferrable.
45L Tax Credit Eligibility
To be eligible for a 45L energy-efficient home credit, a dwelling’s heating and cooling energy consumption should fall below certain national energy standards. Most new developments are already constructed with energy efficiency in mind based on current trends and desires by homeowners to run greener homes.
To qualify for the 45L tax credit, a dwelling unit must be certified to be at least 50% more energy efficient than a similar unit constructed in accordance with the 2006 International Energy Conservation Code, with 10% being derived from building envelope component improvements.
Recent Changes
Current Program Requirements:
With the Inflation Reduction Act, 45L was extended through December 31, 2032.
- Properties must be certified through Energy Star Programs to be eligible
- Starting in 2023 through 2032, credits range from:
- $2,500 to $5,000 per single-family home
- Manufactured homes, and $500 to $5,000 per multifamily dwelling unit.
- For the maximum credit, properties must meet the following:
- Zero Energy Ready Home program and prevailing wage requirements.
- *All residential developments can qualify to start in 2023. No longer just three stories or less, low-rise.
The qualifications for the 45L credit change, and the credit value increases. Units certified under the below programs are eligible for a $2,500 credit. If the units are also certified under the DoE Zero Energy Ready Home (ZERH) program, the credit is $5,000 per unit.
- ENERGY STAR Residential New Construction Program
- ENERGY STAR Manufactured New Home Program
- ENERGY STAR Multifamily New Construction Program
- The credit for multifamily units will be reduced if prevailing wage requirements are not met.
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Other conditions that must be met to be eligible for a 45L credit include:
- The eligible contractor must own the unit at the time of construction
- The building can be no taller than 3 stories
- Energy efficient features such as high R-value insulation, roofing, doors, windows and HVAC systems must be used
- The units must be in the United States
- 10% of the energy efficiency must be derived from the building envelope
- The units must be inspected and verified by an eligible certifier to qualify for the credit
There are multiple types of properties that are eligible for an energy efficient home credit, including:
- Apartment buildings
- Assisted living facilities
- Condominiums
- Multi-family homes
- Student housing
- Single family homes
- Properties that have undergone significant reconstruction or rehabilitation
If you’re unsure about 45L tax credit eligibility, we’ll be happy to advise you and assess your circumstances.
Who receives the 45L?
A 45L Energy Efficient Home credit is available to the eligible contractor that constructed or significantly renovated a qualified energy efficient home. The eligible contractor must own or have basis in the unit during construction to qualify as an eligible contractor.
Who can certify a unit for the 45L federal tax credit?
A 45L To apply for a 45L federal tax credit, someone who has been accredited by the Residential Energy Service network (RESNET) or similar rating network must complete the analysis of the unit. The eligible certifier cannot be affiliated with the contractor seeking the claim in any way. The analysis includes computer modeling and on-site verification as part of the submittal package.
Is it possible to file a 45L claim retroactively?
Eligible contractors can make a retroactive claim for the 45L credit if they didn’t claim for it on a previous tax return. While the 45L credit is available for property substantially completed between August 8, 2005 and December 31, 2022, credits may only be taken on timely filed tax returns or on amended returns.
How does a 45L credit claim work?
A 45L credit claim must be certified and documented by a third-party eligible certifier. This will include an energy analysis and a mandatory site visit from the eligible certifier to confirm the property’s energy efficient performance.
Claiming the 45L Tax Credit
Tri-Merit makes a complex process refreshingly simple.
- We gather data and provide a no-cost feasibility analysis.
- Should you qualify and want to proceed, we will follow IRS-prescribed analysis and modeling criteria to validate energy efficiency and potential tax savings. Upon completion, we provide the required third-party certification report.