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What is the 45L Tax Credit?

The Inflation Reduction Act amended Section 45L, a tax credit to incentivize the new development or major renovation of energy-efficient residential properties for lease or sale. The new Section 45L provisions include two tiers of credits for eligible buildings and units certified to applicable ENERGY STAR® residential and U.S. Department of Energy Zero Energy Ready Home (ZERH) program requirements. The updated Section 45L is extended to qualified residential properties acquired from January 1, 2023, through December 31, 2032. The tax credit's value per dwelling unit varies, reaching a maximum of $5,000, based on factors including the home type, number of stories, and compliance with energy efficiency requirements.

This residential construction tax credit is fantastic if you are already constructing or retrofitting at high efficiency and want to recognize your residential project as ENERGY STAR® or ZERH certified right off the bat.

Qualifying for the Section 45L Tax Credit

Here are the basic eligibility requirements for homes acquired and/or completed after December 31, 2022, and located in the U.S., wanting to claim Section 45L (as found on the Department of Energy and IRS websites). It is important to note that there are differences in terms for single-family vs. multi-family homes. Please contact Green Econome for detailed information. This is a basic outline:

Single Family Homes

1. Certified under the applicable ENERGY STAR Single-Family New Homes (National} Program Requirements.
2. Certified under the most recent ENERGY STAR Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired), or
3. Certified under the most recent ENERGY STAR Manufactured Home National program requirements as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired.

Multi-Family Homes

1. Certified under the most recent ENERGY STAR Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later), and
2. Certified under the most recent ENERGY STAR Multifamily New Construction Regional Program Requirements applicable to its location. (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later).

All Eligible Dwelling Units

Must be certified as a zero-energy ready home under the Zero Energy Ready Home (ZERH) program of the Department of Energy as in effect on January 1, 2023 (or any successor program determined by the Secretary).

What are the Additional Benefits to the 45L Amended by the Inflation Reduction Act?

• Increased credits: for homes acquired between 2023-2032.
• Prevailing wage kicker: tax credit is higher for multifamily projects that meet the prevailing wage requirements.
• Double the savings! 45L tax credit can also be utilized with the IRA’s Section 179D for buildings over 4 stories.

Green Econome Helps Maximize Savings on your Multifamily Projects

While Green Econome is not a tax professional, we work with vetted partners and offer incentive and financing management, as well as project construction and building certifications for multifamily properties. We are a woman-owned, full-service energy and water efficiency construction and consulting company, with over 20 years of combined experience. Tax credits can be complicated, don’t miss out on crucial savings and upgrading your building’s energy efficiency! Contact our founder and CEO Marika Erdely for a consultation.