Update: 45L Tax Credit Extension

The Inflation Reduction Act (IRA) of 2022 provided taxpayers with a tax credit for new or largely reconstructed homes that meet the DOE Zero Energy Ready Home (ZERH) requirements by amending Internal Revenue Code Section 45L. This legislation included a ten-year extension of the 45L Energy Efficiency Home Credit and nearly $370 billion in provisions for green energy efforts.

According to the Department of Energy, new provisions under 45L, which apply to qualified energy-efficient homes attained after December 31, 2022, and before January 1, 2033, include two tiers of credits. Higher credits are designated for homes and units matching the ZERH requirements. For dwelling units within eligible ENERGY STAR Multifamily New Construction Program buildings that meet the ZERH requirements, the 45L credit is $1,000. The 45L tax credit is $5,000 when projects meet prevailing wage requirements.  Manufactured homes and single-family dwellings meeting ENERGY STAR Manufactured New Homes Program and ENERGY STAR Residential New Construction Program requirements receive a 45L tax credit of $5,000.

With the implementation of the IRA’s new energy standards, engaging your green consultant early in the process is imperative so they can review blueprints, conduct site visits, and perform the procedures needed to certify to the new standards. Most consultants are requesting to be brought on to do a feasibility study prior to breaking ground. So make sure if you are planning on taking advantage of this tax provision you engage a consultant upfront and not when the build is complete like under the old rules.

For more information on the new 45L provisions and other tax updates, visit Tidwell Group’s blog, The Insight.

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