Section 45L Federal Tax Credit for Energy Efficient Homes

Residential developers and builders may benefit from recent legislation extending the Section 45L Energy Efficient Home Credit. A credit of $2000 per dwelling unit is available for qualifying properties – and more properties will now qualify.

Qualifying Properties

  • Single-family homes (Buyers may qualify if tax credit is unclaimed)
  • Multifamily up to 3 stories above grade (excludes below-grade parking)
  • New construction | substantial reconstruction | rehabilitation
  • Extended Placed In Service dates
    • Retroactive to property placed in service after January 1, 2018
    • Includes properties placed in service through December 31, 2020

What Improvements Qualify?

Building Envelope  |  HVAC and Hot Water Heating  | High Efficiency Appliances

To claim the tax credit, each dwelling unit must consume at least 50% less energy for heating and cooling than a comparable dwelling unit under the 2006 IECC (International Energy Conservation Code). Improvements to the building envelope must account for at least 10% of the overall reduction.

Improvements must be certified by an eligible certifier that is qualified under RESNET or an equivalent rating standard. Partner Energy has these certified professionals, and we can help you determine if your property qualifies for the Section 45L tax credit.

Consider how this could apply to your portfolio. For example, projects completed in states with building codes that require strong energy efficiency measures may already meet the threshold to claim the tax credit. For most properties, the available credit will far outweigh the certification cost. Consult your own tax, legal, and accounting advisors for further information, including eligibility details.

Example 

  • Multifamily property; 3 floors, 200 units
  • Placed in service 2019
  • Qualifies for tax credit through energy efficient design of building envelope and mechanical systems
  • Improvements verified to exceed 50% 2006 IECC
  • 200 units X $2000 per unit

Potential tax credit: $400,000