Demystifying the Application Process to Claim the 45L Energy-Efficient Home Tax Credit

Builders, developers and homeowners can gain considerable cost savings with the 45L Energy-Efficient Home Tax Credit. As long as they are a qualified contractor for a property that is three stories or lower, and they have incorporated energy-efficient features (i.e., high R-value insulation and roofing, HVAC systems and/or windows and doors) that reduce energy consumption well below national energy standards, they have a good chance qualifying.

The 45L tax credit provides $2,000 per unit for owner-occupied or rental dwelling buildings that meet certain conditions. You can qualify for as little as $2,000 for a single-family home or as much as $1 million for 500 units and more. There is no set maximum number of units!

To learn more about the specific requirements, read our 45L FAQs.

All that stands between the contractor and claiming these valuable credits is the application process. Far too often, builders and developers don’t apply because of the misperception that the process is complicated or will require too much of their time. The good news is that there are experts to do the heavy lifting, and the expert’s costs are easily offset by the cost savings associated with the credits.

The following five steps summarizes the 45L tax credit application process:

  1. A detailed energy analysis is required to claim the 45L credit.
  2. The analysis must be certified by a qualified, unrelated third party, and it must be certified by a licensed engineer.
  3. The licensed engineer will provide a 45L certification that is evaluated, modeled and approved.
  4. Once the certification is complete, the contractor will receive a certification package that contains all necessary documentation to sustain the tax credit if needed for an IRS audit.
  5. Eligible contractors use Form 8908 to claim a credit for each qualified energy-efficient home/building sold or upgraded.

The 45L tax credit was retroactively extended in late 2019 for 2018 and 2019 through the end of 2020. The property for which you are claiming the credit must have been built between August 5, 2005 and December 21, 2020. The 45L tax credit can be claimed retroactively for properties that have been built or remodeled during the past three years. Fortunately, any unused credits can be carried over for up to 20 years.

Remember, the financial benefits of the 45L tax credit, plus the savings that come with greater energy efficiency, make the cost of more efficient building materials and the investment well worthwhile.

ETS can provide a complimentary pre-qualification review of your property to determine if the units will pass the energy requirements. If they do not, then guidance will be provided for the least costly upgrades to help the units pass.

To learn more about how ETS is helping clients take advantage of valuable energy-based tax benefits like the 45L tax deduction, or to request detailed information, contact us at 800.236.6519 or visit our 45L Tax Credit page for more information.


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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