Reduce Energy Consumption for Multi-Family Dwellings and Save

The 45L Energy Efficient Home Tax Credit

The 45L Home Tax Credit equates to $2,000 per unit for energy efficient residential or multi-family properties. Both new construction as well as renovations qualify if the efficiency levels are met, and the credit can be taken by the contractor or developer of these properties completed within the past three years.

Properties that may qualify for the 45L Home Tax Credit include:

  • Single family homes
  • Multifamily properties, up to three stories
  • Apartments, up to three stories
  • Units within an apartment building or condominium,
  • A houseboat
  • House trailer

Also, the property can be either the principle place of residence or a vacation home. Manufactured homes meeting the criteria may also benefit from a tax credit of $1,000 to $2,000.

Energy Reduction Requirements:

  • The dwelling must show at least a 50 percent reduction in heating and cooling energy consumption compared to other units constructed in accordance with the standards set forth in the 2006 International Energy Conservation Code (IECC).
  • At least 10 percent of the energy savings associated with heating and cooling must be derived from attributes associated with the building envelope (roof, walls, windows, etc.).
  • Properties must be 3 stories or less


Although only the dwelling unit’s heating and cooling systems energy consumption are used to determine the requirements for the tax credit, many other factors play a key role. These factors include: insulation, internal heat gains from lights and appliances, window coverings, exterior building color, mechanical ventilation, size of windows, exterior shading, climate zone, duct location, and unit’s air tightness, just to name a few.

With all these variables, it can be difficult to establish the right measures to put in place without a pre-model assessment by a certified rater. Although raters can model the dwelling units and help identify what measure are needed to qualify, an official determination cannot be achieved until an onsite visit is conducted to determine the air tightness of the unit and duct work. Also, note that if a multi-family building receives certification for all its units, the same building plan may not pass in another location due to climate, building orientation, window directions, proximity to adjacent buildings and landscape shading.

The best practice to achieve the consumption requirement is to use the pre-model consumption rate along with general assumptions and worst-case variables to determine what changes, if any, are needed. There are numerous low cost changes that can be made prior to construction to provide a buffer in the event that onsite testing yields less than expected results.

Key Criteria

Raters are often asked how efficient does heating and air conditioning need to be in order to achieve the 50% reduction in energy consumption to qualify for the tax credit. Since all building systems contribute to efficiency, there is no minimum requirement for each specific system as long as the combined systems reach the 50% reduction. Since different systems impact efficiencies more than others, we have put together a list of key criteria, their importance, and what specifications are key to reducing energy consumption by 50%.

Recent Posts

tax planning high-net-worth

Advanced Tax Planning Strategies for High-Net-Worth Individuals 

With evolving tax codes and complex planning vehicles, the high-stakes game of tax strategy can seem daunting for even the savviest investors. However, the rewards for skillful navigation are well worth the effort. Advanced tax planning presents high-net-worth individuals and families with lucrative opportunities to actively minimize tax exposure, unlock savings and optimize wealth transfer.  

Read More »
land value calculation guide

Understanding Land Value in Cost Segregation Studies

One of the best ways to reduce the tax burden of commercial real estate is with cost segregation. If you’re ready to reap the rewards of accelerated depreciation, you’ll need to provide one essential piece of information: land value. Determining this value accurately is key to both IRS compliance and maximizing your deductions—let’s explore how

Read More »
our culture

The Road to $1 Million: How Jill Scaled the Sales Summit

When Jill Mazur saw the email announcing her induction into ETS’s vaunted million-dollar club, it marked the realization of a long-held ambition. “To hit that was amazing. It meant a lot to me to get there, to show the company that I really love what I do and I really want to help people,” she

Read More »

Contact Us