Section 45L of the Internal Revenue Code provides builders of single and multi-family homes a tax credit of $2,000 to meet certain energy conservation requirements. However, the 45L tax credit expired at the end of 2021, leaving homebuilders waiting for its renewal.
The Inflation Reduction Act of 2022, signed into law by President Biden on Tuesday, extended the L45 credit for homes sold or rented in 2022 with few changes. Thus, residences sold or rented in 2022 would qualify for the 45L credit under the 2021 energy efficiency standards. new provisions and requirements.
Beginning in 2023, the Act provides an increased credit of $2,500 for single-family homes and manufactured homes when built to standards set by the Energy Star program for new residential construction or the manufactured home program.
- Single-family homes must meet the Energy Star Single-Family New Homes Program, version 3.1 for homes built before January 1, 2025 and version 3.2 thereafter.
- Manufactured homes must meet the latest requirements of the National Energy Star Program for Manufactured Homes effective January 1, 2023 or January 1 of the two calendar years prior to the date of acquisition of the home.
The law also provides an even higher credit of $5,000 for single-family and manufactured homes when they are certified as a DOE Zero Energy Ready (ZERH) home.
For multi-family homes built after 2022, the law provides a credit of $500 when they meet the Energy Star single-family new home program or $1,000 when homes are ZERH certified.
In addition, starting January 1, 2023, home builders must meet current wage requirements.
The Cut Inflation Act of 2022 has certainly raised the standards for building energy-efficient homes with a compelling tax credit for the next ten years.