The Inflation Reduction Act of 2022 Provides Significant Changes to the 45L Energy Efficient Home Credit

The Inflation Reduction Act of 2022 Provides Significant Changes to the 45L Energy Efficient Home Credit

The Inflation Reduction Act of 2022, passed by the U.S. Senate on August 7, 2022, provides significant changes to the 45L Energy Efficient Home Credit (45L Credit). The House of Representatives is expected to return Friday, August 12, to vote on the bill, and the president is expected to sign it. This highly-valuable tax credit has rewarded home builders for energy efficient residential construction since January 1, 2006. Below is a summary of the changes.

THE 45L ENERGY EFFICIENT HOME CREDIT
The 45L Credit, which currently only applies to homes leased or sold prior to January 1, 2022, provides a $2,000 dollar per home tax credit for homes that meet certain energy efficiency requirements. The new legislation extends the 45L Credit for homes acquired prior to December 31, 2022 with neither change to dollar amount of the credit nor the energy efficiency requirements. However, for homes acquired from January 1, 2023 through December 31, 2032, the changes to the 45L Credit are far more sweeping, as discussed below:

Single Family and Manufactured Homes. In the case of new homes acquired after 2022 which are eligible to participate in the ENERGY STAR Residential New Construction Program or Manufactured Homes Program, the legislation provides a $2,500 credit for energy efficient single family and manufactured new homes meeting certain energy star requirements.

  • Single-family homes must meet the Energy Star Single-Family New Homes Program Version 3.1 for homes acquired before January 1, 2025 and Version 3.2 thereafter.
  • Manufactured homes must meet 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 the dwelling is acquired.

This legislation provides a higher tier credit of $5,000 for eligible single family and manufactured new homes certified as a Zero Energy Ready under the Department of Energy Zero Energy Ready Home Program.

Multifamily Homes. For multifamily homes acquired after 2022 which are eligible to participate in the ENERGY STAR Multifamily New Construction Program, the legislation provides a credit of $500 or $1,000 depending upon qualifications.

Starting January 1, 2023, homebuilders must also satisfy prevailing wage requirements.

TALK TO THE EXPERTS
ICS Tax provides innovative tax planning strategies and specializes in the 45L Credit as well as several others available to those in the construction and real estate industry. Through our affiliate, ICS Inspectors, we have a national team of HERS Raters able to qualify homes for both the ENERGY STAR and the Zero Energy Ready Home programs. Together with you and your tax advisors, we can identify credits and incentives that will reduce tax liabilities and increase profitability. Our nationwide experts are ready to help. » Contact us for a consultation

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