Program Overview
Table of contents
What Is the 45L Tax Credit?
The government established the Section 45L tax credit to incentivize developers, homeowners, and builders to focus more on energy-efficient properties. It enables developers to claim a credit of up to $5,000 for each energy-efficient dwelling they build. The Section 45L tax credit was initially created within the 2005 Energy Policy Act and has since been extended under the Inflation Reduction Act of 2022. In its current form, this credit offers higher tax benefits on units built and sold between the beginning of 2023 and the end of 2032.
Under this policy, there are a few differences in how much developers can receive depending on the type of building:
- Single Family Homes: Developers can receive a $2,500 tax credit for homes certified under EnergyStar Single Family New Homes Program Version 3.1. Single-family homes certified under the Department of Energy's (DOE) Zero Energy Ready Home (ZERH) can earn up to $5,000.
- Manufactured Homes: Homes certified under the EnergyStar Manufactured Home National Program can receive up to $2,500. You can also receive a $5,000 credit if your manufactured home is accredited as a DOE recognized ZERH.
- Multifamily Homes: Multifamily homes erected after 2020 and rated as an ENERGY STAR Single Family New Home will receive a $500 credit, possibly increasing to $2,500. When certified as a DOE recognized ZERH, these homes can acquire a $1,000 credit, potentially rising to $5,000.
Eligibility Requirements
If you're interested in taking advantage of this Section 45L tax credit, it's imperative to have a clear understanding of the qualification standards. These credits are open to all occupied homes in the United States that align with the above energy-efficient standards. Eligible contractors must own the land, maintain a basis during construction, and sell or lease it for use.
Homes built or acquired before 2023 must have an annual heating and cooling consumption equal to 50% less consumption than comparable homes that meet energy standards. Homes built or acquired before 2023 should also meet certain federal manufactured home rules and EnergyStar requirements. Those built between 2023 and 2032 must align with specific energy standards while offering prevailing wages during construction. For qualifying parties, these credits are commonly used on dwellings such as:
- Affordable housing;
- Condominiums;
- Apartments;
- Residential buildings undergoing major renovations;
- Student Housing; and
- Senior or assisted living facilities.
How Can You Claim the Credits?
Interested parties must align with all requirements set forth by Section 45L within the Internal Revenue Code. Establishing sound record-keeping practices will allow your organization to support your claim effectively, and CTI is here to guide you through the documentation and filing process. The application for Section 45L credits will ultimately be filed with Form 8908 on a tax return.
Why Should You Work With CTI?
Whether you may be interested or need assistance securing tax credits for your energy-efficient homes, you can trust the team at CTI to help. Our team has years of experience securing financial savings for businesses of all shapes and sizes. Your consultant team will comprise of numerous professionals with unique interests and diverse backgrounds, including legal, accounting, construction, engineering, and more. With this wide knowledge base and our dedication to personalized solutions, we have what it takes to maximize your available benefits with the financial support to ensure accuracy and security.
Our clients choose our organization because we drive results. We've helped our clients achieve billions of dollars in credits and deductions through transparent and effective advice, providing meaningful support with clear and consistent reporting. We leverage the latest software and technology to maintain effective and accurate workflows, models, and calculations. Regardless of your needs, you can count on our team at CTI to approach your project with the best possible practices to capture and defend your credits.
Connect With CTI for Expert 45L Energy Tax Credits
Focus on what you do best with confidence, knowing the CTI team is in your corner. Satisfying 45L tax credit requirements is straightforward with our professional tax consultants by your side. We're passionate about delivering unrivaled financial value to all our clients through top-of-the-line, personalized services designed to create solutions that align with your needs.
Contact our team online to learn more about our services today.
