Energy-Efficient New Homes Tax Credit for Home Builders (IRC Section 45L)

Description

The Energy-Efficient New Homes Tax Credit for Home Builders (IRC Section 45L) allows developers or builders of a qualified new energy-efficiency home to claim up to $5,000 for homes acquired in 2023 through 2032, and $1,000 or $2,000 for homes acquired before 2023, in the year that home is sold or leased as a residence.

Eligibility

To qualify, eligible contractors must construct or substantially reconstruct a qualified new energy efficient home. They also must own the home and have a basis in it during the construction, and they must sell or lease the home to a person for use as a residence. The homes must also be specified categories of single-family (including manufactured) or multifamily homes under Energy Star programs, be located in the United States, and meet applicable energy saving requirements based on home type and acquisition date. These new 45L rules apply to qualified energy efficient homes acquired after December 31, 2022, and before January 1, 2033, for use as a residence during the taxable year.

How the Program Works

The new 45L provisions include two tiers of credits, with the higher credits for eligible homes and dwelling units certified to applicable ZERH program requirements. The 45L credit is $5,000 for single family and manufactured homes eligible to participate in the EPA’s ENERGY STAR Residential New Construction Program or the ENERGY STAR Manufactured New Homes Program, respectively, and which are certified by the Department of Energy’s Zero Energy Ready Home (ZERH) program, as in effect on January 1, 2023 (or any successor program determined by the Secretary of the Treasury). The 45L credit is $1,000 for dwelling units that are part of a building eligible to participate in the ENERGY STAR Multifamily New Construction Program, and which are certified to applicable ZERH program requirements, unless the project meets prevailing wage requirements, in which case the 45L credit is $5,000 per dwelling unit.

For 2022 and before, the Inflation Reduction Act extended the previously expired credit to equal $2,000 for each home that use at least 50% less energy than a comparable home and gets at least 1/5 of its energy savings from building envelope improvements. Manufactured homes that meet these standards plus the Federal Manufactured Home Construction and Safety Standards (FMHCSS) may qualify for the full $2,000 credit. Manufactured homes that don’t meet the standards for the full credit may still qualify for a $1,000 credit under a different 30% standard. Homes must also meet Energy Star requirements.

For homes sold or leased before 2023, an eligible contractor must obtain a certification that the dwelling unit meets the requirements of section 45L(c) (as in effect for homes sold or leased before 2023) before claiming the section 45L credit. The certification will be treated as satisfying the requirements of section 45L(c) if all the construction has been performed in a manner consistent with the design specifications provided to the eligible certifier and the certification contains all of the information required by section 3 of Notice 2008-35, or, for manufactured homes, section 3 or section 4 of Notice 2008-36, both available here.

For homes sold or leased after 2022, an eligible contractor must obtain any certification(s) the dwelling unit needs to meet the applicable program requirement(s) referred to in section 45L(c) before claiming the section 45L credit. These program requirements are discussed earlier. Certification information is available on the referenced websites.

Further information about Energy Saving Requirements.

How to Apply

To claim the credit, use IRS Form 8908: Energy Efficient Home Credit. 
Exception: If your only source to claim the credit is from a partnership or S corporation, use Form 3800, General Business Credit.

Contact Information

Internal Revenue Service (IRS),
1111 Constitution Avenue, N.W.,
Washington, D.C. 20224
(800) 829-1040