HOW IT WORKS
An eligible contractor must have constructed a qualified energy efficient home, as well as owned and have had a basis in the home during its construction. An eligible contractor may claim the credit for each home that qualifies for the credit if:
- It is located in the United States
- It meets certain energy saving requirements
- It is sold or leased on or before December 31, 2021 for use as a residence (the credit can be taken retroactively for 3 years back or to any open tax year)
- The residence or building must not be more than three stories above grade in height.
The §45L credit not only includes new construction, but reconstruction and rehabilitation projects. The incentive applies to single-family homes as well as condominiums, apartment complexes, and other multifamily residential buildings whereby each unit may qualify for a $2,000 credit.
ENERGY SAVING REQUIREMENTS
The §45L credit is $2,000 for a dwelling unit that is certified to have an annual level of heating and cooling energy consumption at least 50% below the annual level of heating and cooling energy consumption of a “comparable dwelling unit” and has building envelope component improvements that account for at least 1/5 of the 50% reduction in energy consumption.
A comparable dwelling unit:
- First, it must be constructed according to the standards of chapter 4 of the 2006 International Energy Conservation Code, including supplements, as in effect on January 1, 2006,
- Second, its heating and cooling equipment efficiencies must correspond to the minimum allowed by Department of Energy regulations under the National Appliance Energy Conservation Act of 1987 that are in effect when its construction is completed.
CLAIMING THE 45L CREDIT
Certification must be obtained to verify that the home satisfies specific energy efficiency requirements. Further, certification must be done using an independent, qualified individual to verify and certify that the property installed satisfies specific energy efficiency requirements using IRS-approved software. A site visit is required to verify installation of the energy efficient features. The tax credit is filed using IRS Form 8908, Energy Efficient Home Credit.
Energy Efficiency Rebates and Incentives From States and Energy Utilities
One of the best resources for information pertaining to State and Energy Utility energy rebates and incentives is from the Database of State Incentives for Renewable Energy or DSIREUSA.org
NOTICE: State of California 45L Credit for HERS Ratings
The State of California has its own online registration for 45L tax credits. Information from the California Home Energy Efficiency Rating System (CHEERS) website states:
What if my projects were uploaded to another HERS registry for Title 24 compliance?
No problem at all. Projects registered or HERS tested in another registry can be re-uploaded to CHEERS for 45L certificates only.
In this case, upload the XML energy file originally used for CF1R registration to CHEERS. If the project energy features meet the 45L efficiency requirements, a 45L certificate will be made available to the HERS Rater for review, signature and download. No other CF2Rs or CF3Rs need to be completed.
Here is the link for the CHEERS website regarding the 45L tax credit: https://www.cheers.org/45l-tax-credit/ (Scroll to bottom of page for links and information)
