Offset the costs of building
energy-efficient properties with 45L tax credits.

45L Tax Credit

The Section 45L tax credit offers a compelling financial advantage for those who invest in energy-efficient construction and renovation. Claiming this credit can result in significant savings on your tax bill.

The credit amount is up to $5,000 per eligible dwelling unit for new energy-efficient homes. The credit is available to the property owner or developer who constructed or renovated the property, not to the eventual homebuyer.

Qualifying for 45L Tax Credits

Eligible properties can be single-family homes, townhouses, condominiums, or apartment buildings. To qualify for the credit, the dwelling units must meet certain energy efficiency standards, which are usually determined by comparing the energy consumption of the property to that of a reference property built according to the standards set by the International Energy Conservation Code (IECC).

Energy-Efficient Buildings that Qualify

The following energy-efficient buildings leased or sold through qualify for the Section 45L tax credit:

  • Residential Condominiums
  • Apartment Buildings
  • Affordable Housing
  • Residential Buildings Undergoing Major Rehabilitation
  • Student Housing
  • Senior/Assisted Living Facilities
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Section 45L Credit Summary

HOME TYPE REQUIREMENTS PREVAILING WAGES 2023 & BEYOND
Single Family Energy Star No $2,500
ZERH No $5,000
Manufactured Home Energy Star No $2,500
ZERH No $5,000
Mutlifamily Energy Star No $500
ZERH No $1,000
Mutlifamily Energy Star Yes $2,500
ZERH Yes $5,000

45L Tax Credits and ENERGY STAR

ENERGY STAR, a program by the US Environmental Protection Agency (EPA), acts as a benchmark for energy-efficient products and homes. It is a trusted mark of quality, signifying that a home meets specific energy performance standards established by the EPA.

The 45L tax credit and ENERGY STAR work hand-in-hand. By building homes that meet ENERGY STAR standards, builders can become eligible for the tax credit.

What Qualifies As An ENERGY STAR Certified Home?

  • High-Quality Insulation
  • High-Performance Windows
  • High-Efficiency Heating & Cooling System For Improved Comfort
  • Comprehensive Water Management Techniques That Protect Against Moisture Damage
  • Advanced Air Sealing

ENERGY STAR certified new homes are energy efficient by design, with savings that start now and continue into the future. Better systems and construction features make all the difference throughout your home. ENERGY STAR certified homes are at least 10 percent more energy efficient than standard new homes built to code—and even more efficient when compared to existing homes.

Frequently Asked Questions

What is the 45L tax credit?
45L Energy Efficient Home Credit rewards builders and homeowners for constructing or substantially renovating energy-efficient homes.
How much is the credit worth?
The tax credit could be in the range of $500 – $5000 per unit for dwelling units placed in service starting from 2023.
Who is eligible for the credit?
Builders and developers who construct or renovate residential properties.
What types of homes qualify?
Single-family detached homes, townhouses, duplexes, condominiums, garden-style apartments, assisted living facilities, manufactured homes, and student housing meeting specific energy efficiency standards.
How long is the credit available?
The Inflation Reduction Act extended the tax credit to homes acquired (leased or sold) between January 1, 2023, and December 31, 2032.
Are homes acquired before 2023 eligible for the credit?
Yes, although the credit amount is $2,000 per unit for single-family and multi-family projects (3 stories or less) or $1,000 per unit for manufactured homes.
Who claims the credit?
Typically, the builder or developer who have basis during construction claim the credit.
How do I claim the credit?
File Form 8908 with your tax return. Certification by a qualified individual is a requirement.
When do I claim the credit?
You can claim the credit in the year your home is acquired (leased or sold).
Do I need special documentation?
Yes, you’ll need an energy certification by an eligible certifier and proof of compliance with program requirements.
What about multifamily housing?
Credits range from $500-$5,000 per dwelling unit depending on certification and prevailing wage requirements.
What about renovations?
Only substantial renovations that meet specific energy efficiency improvements qualify.
What are the energy efficiency standards?
Homes must meet either ENERGY STAR or DOE Zero Energy Ready program requirements to qualify between 2023 – 2032.
Can I use the credit with other tax incentives?
Yes, in some cases, but consult a tax professional for potential interactions.