Section §45L Tax Credit
Offset the costs of building energy-efficient properties
What is the §45L Tax Credit?
The §45L tax credit, also known as the Energy-Efficient Home Credit, is a federal tax incentive provided under Section 45L of the Internal Revenue Code (hence the § symbol). This tax credit encourages the construction of energy-efficient homes in the United States.
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.
Key Points About The §45L Tax Credit
- Eligible Homes: The credit applies to newly constructed homes that meet certain energy efficiency standards. These standards include reducing heating and cooling energy consumption by at least 50% compared to a reference home built to meet the standards of the 2006 International Energy Conservation Code (IECC), with adjustments for location and climate zone.
- Types of Homes: Eligible homes include single-family homes, multi-family units of up to three stories, and manufactured homes that meet the energy efficiency criteria.
- Amount of Credit: The tax credit amount is up to $5,000 per eligible dwelling unit.
- Claiming the Credit: To claim the §45L tax credit, the homebuilder or developer must file IRS Form 8908 along with their tax return for the year the homes were constructed and placed into service. The credit is claimed for each eligible dwelling unit.
- Certification: The energy efficiency of the homes must be certified by a qualified individual or organization, such as a certified home energy rater, engineer, or contractor.
- Standards: 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
Section §45L Tax Credit Summary
| HOME TYPE | REQUIREMENTS | PREVAILING WAGES | 2023 AND BEYOND |
|---|---|---|---|
| Single Family | EnergyStar | No | $2,500 |
| ZERH | No | $5,000 | |
| Manufactured Home | EnergyStar | No | $2,500 |
| ZERH | No | $5,000 | |
| Multifamily | EnergyStar | No | $500 |
| ZERH | No | $1,000 | |
| Multifamily | EnergyStar | Yes | $2,500 |
| ZERH | Yes | $5,000 |
§45L Tax Credits and
ENERGY STAR
ENERGY STAR is a voluntary program established by the U.S. Environmental Protection Agency (EPA) to promote energy efficiency and environmental sustainability. The ENERGY STAR program provides certification for various products, homes, and buildings that meet stringent energy efficiency standards.
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?
- Energy Efficiency Standards: The home must be designed and constructed to be significantly more energy-efficient than homes built to standard building codes. This typically involves using high-efficiency heating, cooling, and ventilation systems; effective insulation; high-performance windows; and other energy-saving features.
- Third-Party Verification: The energy efficiency of the home must be verified by a third-party Home Energy Rater or other qualified professional. These individuals conduct on-site inspections, perform energy modeling, and use diagnostic tools to ensure that the home meets ENERGY STAR requirements.
- Comprehensive Thermal Enclosure System: The home must have a comprehensive thermal enclosure system, including effective insulation, air sealing, and high-performance windows and doors, to minimize heat loss and air infiltration.
- High-Efficiency Heating, Cooling, and Ventilation Systems: ENERGY STAR certified homes use high-efficiency heating, cooling, and ventilation systems that meet or exceed ENERGY STAR guidelines. These systems are designed to deliver superior comfort and indoor air quality while reducing energy consumption.
- Water Management System: The home must incorporate a water management system designed to prevent water intrusion, manage moisture, and promote durability. This includes proper flashing, drainage, and waterproofing details.
- Energy-Efficient Lighting and Appliances: ENERGY STAR certified homes feature energy-efficient lighting fixtures and appliances, including ENERGY STAR-rated lighting, appliances, and ceiling fans, to further reduce energy consumption and utility costs.
- Performance Testing: ENERGY STAR certified homes undergo performance testing to ensure that they meet the program's stringent energy efficiency requirements. This may include blower door testing to measure air leakage, duct leakage testing, and other diagnostic tests.
By meeting these criteria, ENERGY STAR certified homes provide homeowners with superior energy efficiency, comfort, indoor air quality, and durability while reducing energy consumption and utility costs.
The CG Moneta
Advantage
In today's rapidly evolving real estate landscape, sustainability and energy efficiency are becoming increasingly important considerations for homeowners and developers alike. As the world grapples with environmental challenges and the push for greener living gains momentum, incentives like the §45L Tax Credit offer a compelling opportunity for those investing in energy-efficient homes.
The §45L Tax Credit, also known as the Energy-Efficient Home Credit, is a federal tax incentive aimed at promoting the construction of energy-efficient residential properties. Qualifying homes can earn a tax credit of up to $5,000 per dwelling unit, incentivizing builders and developers to incorporate energy-saving features into their projects.
One company at the forefront of assisting clients in maximizing the benefits of the 45L Tax Credit is CG Moneta Consulting. With a team of expert consultants specializing in tax incentives and energy efficiency, CG Moneta Consulting provides invaluable guidance and support to clients navigating the complexities of the tax credit landscape.
CG Moneta Consulting offers a range of services tailored to help clients identify, qualify for, and claim the 45L Tax Credit effectively. Their team of professionals possesses in-depth knowledge of the tax code and energy efficiency requirements, ensuring clients capitalize on all available opportunities for savings.
What sets CG Moneta Consulting apart is their commitment to providing personalized service and comprehensive solutions to meet each client's unique needs. Whether it's conducting energy efficiency assessments, coordinating with third-party certification providers, or assisting with documentation and compliance, CG Moneta Consulting is dedicated to delivering results.
Furthermore, CG Moneta Consulting collaborates with a network of trusted partners and providers specializing in the 45L Tax Credit, ensuring clients have access to the best resources and expertise available. Through strategic partnerships and industry connections, CG Moneta Consulting streamlines the process of claiming the tax credit, saving clients time and resources.
With CG Moneta Consulting's expert guidance and specialized services, clients can navigate the complexities of the tax credit landscape with confidence, knowing they have a trusted partner by their side every step of the way.
Specialized Tax Incentives
CG Moneta Consulting offers an array of specialized tax incentive services that align with the leading firms nationwide, ensuring comprehensive support and significant benefits for businesses across all industries and sizes. Our team combines expertise, industry knowledge, and innovative strategies to deliver tailored solutions that optimize tax incentives and maximize savings. Whether it's Cost Segregation, Research & Development Tax Credits, Energy Efficiency Deductions, or other specialized incentives, we provide thorough analysis, meticulous documentation, and strategic guidance to help businesses unlock their full tax-saving potential. With a commitment to excellence and a focus on client success, CG Moneta Consulting stands as a trusted partner for businesses seeking to navigate the complex landscape of tax incentives and realize substantial financial benefits.
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