Deadline Alert: Don’t Miss Out on Valuable Energy Tax Incentives for Residential Property

The passage of legislation in late 2019 made two energy tax incentives for noncommercial property retroactive to 2016 and extended the deadline to claim them to December 31, 2020.

Section 45L Energy Efficient Tax Credit

Lawmakers extended the 45L Energy Efficient Tax Credit for dwellings or residential units on qualifying properties. This tax credit is equal to $2,000 per residential unit or dwelling and applies to apartments, townhomes, condominiums and single-family homes. To be eligible, each unit should provide a level of energy efficiency that is higher than national energy standards and applicable building codes.

Any apartment or condominium project that was developed as new construction or rehabilitated within the past four years should be evaluated for the 45L tax credit. To qualify, it should incorporate energy-efficient features such as high R-value roofing and insulation, heating and air conditioning systems, windows, doors and other energy-efficient features. Qualifying property under Section 45L must be three stories or lower and the project must be certified. Learn more.

Section 179D Energy Policy Act Tax Deduction

If your residential property is higher than three stories, it may qualify for the Section 179D Energy Policy Tax Deduction. The 179D tax deduction is available for apartment buildings of four or more stories as well as for new building construction and energy renovations on existing commercial buildings. It applies to buildings that reduce total annual energy and power costs for interior lighting systems, heating, cooling, ventilation and hot water systems by 50%. The building may qualify for up to $1.80 per square foot ($.60 per square foot for each system) and partial deductions are allowed for lighting projects. To claim the deduction, the energy efficiency project must be certified. Learn more.

Act Now to Claim Valuable Tax Savings

Time is running out on these tax incentives—you must claim them no later than December 31, 2020. To do so, it is essential to obtain an analysis of all qualifying expenditures. You’ll also need a Section 45L tax credit certification or an Energy Policy Act certification for Section 179D to claim the incentives. Tax returns may be amended retroactively for three consecutive years.

An energy tax certification must be conducted by a licensed professional who is an unrelated third party to the building project. For 45L energy-efficient tax credits, Engineered Tax Services will provide certifications that are evaluated, modeled and signed-off by our licensed engineers. Our certification package includes all necessary documentation and certifications to sustain the tax credit in the case of an IRS audit.

For a 179D Energy Policy Act certification, we conduct a thorough review and provide the required documentation and certification to claim the deduction.

ETS specialists have provided analyses and energy tax certifications for thousands of companies across the country. We have perfected the process through our extensive experience and our precise documentation meets and exceeds the standards required by the Department of Energy and the IRS to claim real estate-related deductions and tax credits.

Do you have questions about whether your property may qualify for 45L tax credit or 179D tax deduction? Contact Engineered Tax Services today to see if your building project qualifies for these significant tax incentives.


Heidi Henderson

Heidi Henderson

Tuesday, September 27, 2022 | 1:00pm EDT

Understand the energy updates (179D / 45L) made in the inflation reduction act

The Inflation Reduction Act recently signed into law by the Biden Administration makes major investments in healthcare, domestic energy production and manufacturing, and climate change. This 2-hour webinar will review the areas that specifically impact many areas of the Real Estate Industry.

179D and 45L webinar

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