How Reduction Act impacts 45L-tax credit incentive raising the bar for energy-efficient buildings.
The Inflation Reduction Act of 2022 has undoubtedly raised the bar for energy-efficient home construction by providing a compelling tax credit for the next ten years.. Have you heard about IRS Code Section 45L- tax credit incentives for builders, developers, and contractors to design and construct energy-efficient homes? It provides builders and developers with $2,000-$5,000 in tax credits for each qualifying housing unit built or remodeled to certain energy-saving specifications.
The Inflation Reduction Act of 2022, H.R. 5376, signed by President Biden on August 16, 2022, effectively extended the 45L credit for homes sold or leased in 2022. As a result, homes sold or leased in 2022 would be eligible for the 45L credit under the 2021 energy efficiency standards. However, the Act significantly changes the 45L Energy Efficient Home Credit with new provisions and requirements from January 1, 2023 to December 31, 2032.
Beginning in 2023, the Act provides a $2,500 45L tax credit for single-family and manufactured homes built in accordance with the ENERGY STAR Residential New Construction Program or the Manufactured Homes Program.
Single-family homes must comply with the ENERGY STAR Single Family New Homes Program, Version 3.1 for homes built before January 1, 2025, and Version 3.2 for homes built after that date.
Manufactured homes must comply with the most recent ENERGY STAR Manufactured Home National Program requirements, which are in effect on the later of January 1, 2023 or January 1 of the two calendar years preceding the date the dwelling is acquired.
The Act also includes a $5,000 45L tax credit for single-family and manufactured homes that are certified as a DOE Zero Energy Ready Home (ZERH).
Archenergy can suggest how to benefit from this IRS Code Section 45L-tax credit incentive, as well as provide energy modeling and other components required to comply with this incentive.
An eligible contractor must have built a qualifying energy-efficient home and owned and had a basis in the home during its construction. Newly built homes and improvements to existing homes are eligible if they meet the following criteria:
Certified to ensure an annual level of heating and cooling energy consumption that is at least 50% less than a comparable housing unit built in line with the 2006 IECC requirements.
Building envelope improvements that yield at least one-fifth of the 50% decrease in energy usage.
Three stories above ground level or less.
Rented, sold, or used as a dwelling (the credit can be taken retroactively for three years back or to any open tax year)
Single-family houses, apartment complexes, assisted living facilities, student housing, and condominiums are all eligible for the 45L Tax Credit. Each unit in a multifamily residential complex may be eligible.