IRC Code Section 45L provides a tax credit to developers and builders for constructing or significantly renovating energy-efficient residential buildings. The credit is available for each unit that meets specific energy-saving standards set by the Department of Energy. Eligible properties include single-family homes, apartments, townhomes and condos. For each qualifying unit, developers can claim a credit of $500, $1,000, $2,500 or $5,000. This incentive encourages the construction of energy-efficient housing and helps reduce overall energy consumption.
The different credit options are offered based on various combinations of the following criteria:
Energy Star or Zero Energy Ready compliance are mandatory components to capture this credit starting with homes sold or leased after 1/1/2023.
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Section 45L is a federal tax credit for energy-efficient residential buildings, providing incentives for builders and developers to construct energy-efficient homes and dwelling units.
Eligible taxpayers include builders, developers, and contractors who construct or significantly renovate energy-efficient residential properties, including single-family homes, multi-family buildings, and certain residential rental properties.
The credit is between $500 and $5,000 per dwelling unit for homes that meet specific energy efficiency standards and/or pay prevailing wages and meet apprenticeship program requirements.
The property must be certified to achieve at least 50% energy savings for heating and cooling over a comparable dwelling unit constructed in accordance with the applicable International Energy Conservation Code (IECC). At least one-fifth of the energy savings must come from building envelope improvements.
A certified third-party professional, such as a RESNET (Residential Energy Services Network) rater, must conduct an energy analysis and provide certification that the property meets the required standards.
Yes, the credit can be claimed for properties that were constructed and sold within the eligible time frame, provided they meet the energy efficiency requirements.
Necessary documentation includes the energy certification report from a qualified professional and records of the property's construction or renovation details.
No, there is no limit on the number of dwelling units that can qualify.
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