Enhance Your Cash Flow with the 45L Tax Credit for Energy Efficient Homes
At Engineered Tax Services (ETS), we specialize in maximizing your financial benefits through the 45L Energy Efficient Home Tax Credit.
If you've been involved in constructing or substantially reconstructing residential properties, you may be eligible for significant tax savings.
What is the 45L Energy-Efficient Tax Credit?
The 45L Tax Credit is a federal incentive that offers $2,000 per residential unit or dwelling to developers who construct or renovate homes, apartments, and condominiums with energy consumption levels significantly below the national energy standards.
This tax credit is applicable to properties that have been sold or leased for use as a residence.
What kind of energy standards are necessary to be eligible?
Pre-2023: A qualifying single-family home or multi-family property must consume 50% less heating and cooling energy than a comparable structure built in accordance with 2006 IECC standards. The building envelope itself (insulation, windows, doors, roof, foundation, etc.) must account for at least one-fifth of the energy-saving improvements.
2023 and Later: Buildings must meet either ENERGY STAR or Zero Energy Ready Home (ZERH) standards and be certified by an IRS-approved entity. To obtain ENERGY STAR certification, the building must perform better than at least 75% of similar buildings.
How Much Can You Save?
| Number of Residences | Tax Credit Amount |
|---|---|
| 10 | $20,000 |
| 50 | $100,000 |
| 100 | $200,000 |
| 500 | $1,000,000 |
| 1,000 | $2,000,000 |
| 1,500 | $3,000,000 |
Why Invest in the 45L Tax Credit?
- Cost Efficiency: Dramatically reduce your construction or renovation costs through substantial tax deductions.
- Enhanced Marketability: Improve the appeal of your properties with recognized energy-efficient certifications.
- Environmental Impact: Support sustainability by meeting stringent energy-saving standards that benefit the environment and your community.
Find Out How Much You Can Save Today!
Who Can Benefit?
Eligible contractors include builders, developers, and other entities who have constructed qualifying residential properties. The credit is applicable to:
- Single-family homes
- Multifamily properties (up to three stories)
- Apartments (up to three stories)
- Units within apartment buildings or condominiums
- Houseboats and house trailers
- Manufactured homes meeting certain criteria
Why Choose ETS for Your 45L Certification?
Engineered Tax Services is one of the few professional engineering firms that combines licensed engineers, LEED Accredited Professionals, and experienced Certified Public Accountants.
We offer:
- Comprehensive, detailed certification packages
- Expertise in identifying additional tax benefits, including state and local incentives
- Unmatched technical knowledge and audit defense
Common Questions About the 45L Tax Credit
The eligible contractor (usually the developer, builder or homeowner) must obtain certification from an accredited, IRS-approved independent certifier. The independent certifier will conduct on-site verifications and computer modeling to create a certification package, which can then be used to file for the 45L tax credit.
Yes. The 45L credit may be claimed retroactively for qualifying properties that were built or remodeled any time within the past three open tax years.
Yes. Section 45L considers any property that has undergone substantial rehabilitation to be new construction. In addition to newly built homes, renovation or remodeling projects may also qualify for the 45L tax credit.
Yes. Unused 45L tax credits may be carried forward up to 20 years.
No. Authorized and eligible certifiers are not permitted to check their own units. Eligible certifiers are likewise not allowed to check units belonging to family members. You must hire an independent third party (who has been properly accredited) to evaluate the property.
If you want to be eligible for the 45L tax credit, consider implementing:
- Double- or triple-pane window glass
- A hydronic heating system
- Reflective roofing
- An HVAC unit with a SEER rating of 13 or higher
- Exterior doors with extra insulation
- Insulation with high R-values
- A gas furnace system that runs at 80% efficiency or higher
- Additional foundation insulation
- Low-E vinyl windows
- Structural insulated panels
No. As long as your buildings meet all requirements, you can claim 45L tax credits for as many units as you own.
Eligible contractors may request a tax credit of up to $2,000 or $5,000 (depending on the circumstances) for energy-efficient residential dwellings that are either newly built or substantially renovated.
In order to claim the 45L tax credit, you must own and have a basis in a certified energy-efficient residential building during its construction. Individuals, trusts, estates, partnerships, associations, companies and corporations may claim the 45L credit on qualifying properties.
Pre-2023: Yes. Any deduction amount claimed under 45L will reduce the basis of buildings supported by Section 42 Low-Income Housing Tax Credits (LIHTCs).
2023 and Later: No. 45L credit amounts no longer reduce the adjusted basis of LIHTC-supported buildings.
Pre-2023: No. In order to be eligible for 179D, residential buildings must be at least four stories tall. To be eligible for 45L, residential buildings must be under three stories tall. It is not possible for a residential building to meet both of these height requirements at once.
2023 and Later: Yes. Because the 2023 update removes height restrictions for 45L, it is now possible to claim both 45L and 179D on residential buildings of four or more stories.
Pre-2023: 45L does not have prevailing wage provisions for tax years prior to 2023.
2023 and Later: Prevailing wages are the average wage a specific type of employee could expect to earn in a specific area. Due to differing costs of living, prevailing wages vary state-by-state and region-by-region. Official prevailing wages may be found at www.sam.gov. Taxpayers wishing to request prevailing wages for job titles and geographic locations not included on this site should email [email protected]. Further guidance regarding prevailing wage requirements is included in IRS Notice 2022-61.
No. There are no apprenticeship requirements or provisions for the 45L energy-efficient tax credit.
Ready to Unlock Your Savings?
Let's get started by talking to one of our Specialty Tax Experts to see how much we can save you by getting a 45L Analysis.
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