| Program Name: | Residential Energy Efficient Homes Credit for Builders/Developers (IRC § 45L) |
| Program Sponsor: | U.S. Internal Revenue Service |
| Program Type: | Tax Incentives |
| Technology: | Alternative Energy Generation/ Renewables; Energy Efficiency/ Demand Response; Energy Storage; Low Embodied Carbon Materials |
| Fuel: | Fuel Neutral |
| Eligibility: | Developers/ builders of new or substantially reconstructed residential homes or apartments |
| Cost: | N/A |
Description
The Internal Revenue Code § 45L Tax Credit for Energy Efficient Home Builders, part of the Inflation Reduction Act of 2022 (IRA), provides federal tax credits to builders of energy-efficient homes and apartments. The credit, extended through 2032, is tied to certification under eligible versions of the ENERGY STAR program requirements. On September 27, 2023, the IRS issued Notice 2023-65, which contained guidance for taxpayers on the § 45L credit as amended by the IRA.
Eligibility
Eligible developers who build or substantially reconstruct energy-efficient homes or apartments on or after January 1, 2023, may claim tax credits, with amounts up to $5,000 per home. Contractors must meet requirements outlined in Internal Revenue Code (IRC) Section 45L, and homes must meet specifications under IRC Section 45L to qualify. The credit amount varies based on factors such as the type of home, energy efficiency, and acquisition date.
Certification to an eligible version of the relevant ENERGY STAR program is a prerequisite.
How the Program Works
For homes acquired between 2023 and 2032, the credit is tied to certification under ENERGY STAR program requirements, with varying amounts based on the program and its requirements. Minimum ENERGY STAR program versions eligible for the credit are specified annually. Additional credits are available for homes certified to DOE’s Zero Energy Ready Home Program. On September 27, 2023, the IRS issued Notice 2023-65, which contained guidance for taxpayers on the § 45L credit as amended by the IRA.
Available Credits
- $2,500 for Single-Family Homes certified under ENERGY STAR SFNH program.
- $2,500 for Manufactured Homes certified under ENERGY STAR MH program.
- $500 for Multifamily Homes certified under ENERGY STAR MFNC program, with $2,500 available when prevailing wage requirements are met.
- Larger tax credits are available for homes certified under DOE’s Zero Energy Ready Home Program.
Key Points from IRS Notice 2023-65
- Certification is necessary for a home to meet ENERGY STAR program requirements.
- Newer versions automatically meet minimum requirements.
- Homes in regions with defined requirements must meet both national and regional standards for eligibility.
How to Apply
Eligible contractors can claim the credit using Form 8908. This form is utilized to claim a credit for each qualified energy-efficient home sold or leased as a residence during the tax year.
Contact Information
Refer to IRS Notice 2023-65 or contact the Internal Revenue Service directly.
Internal Revenue Service (IRS),
1111 Constitution Avenue, N.W.,
Washington, D.C. 20224
(800) 829-1040