45L Tax Credit: Energy Efficient Home Tax Credit
Under the provisions of the 45L tax credit, eligible contractors may request up to a $2,000 credit for new energy-efficient systems and installations in units leased or sold in what is currently an open tax year through December 31, 2021. The 45L tax credit can be claimed retroactively for all residential and apartment buildings completed within the open tax years (usually 3-4 prior years for most taxpayers), and any unused credit may be carried forward for up to 20 years.
To claim the 45L tax credit, the property must meet the following criteria:
- Units, homes leased up or sold in an open tax year. (generally the last 3 years)
- Can be no more than 3 stories above grade.
- For single- and multi-family dwelling units, the unit must consume a minimum 50% less energy to offer the same heating and cooling functions as any identical non-energy-efficient residence.
- Manufactured homes must reduce energy usage by at least 30%
- 10% of the energy efficiency must be derived from the building envelope.
- Properties that undergo major rehabilitation and new construction can qualify for the 45L tax credit if they pass the energy audit and get certified as energy efficient.
To claim the 45L tax credit, the individuals must meet the following criteria:
- A person must own and have a basis in the qualified energy efficient home during its construction to qualify as an eligible contractor with respect to the home.
- A “person” can be an individual, a trust, an estate, a partnership, an association, a company or a corporation.
- In addition to single-family homes, other dwellings such as apartment buildings, townhouses, student housing, condominiums and assisted living facilities are eligible for the 45L tax credit.
- The qualified contractor – typically the developer, builder or homeowner – is the only person who can claim the 45L tax credit and must own the unit at the time of construction or improvement.
Eligible contractors use Form 8908 to claim a credit for each qualified energy efficient home sold during the year. The first step toward applying for the 45L credit is a detailed energy analysis that must be certified and documented by a third-party licensed professional. Additionally, homeowners should acquire an energy efficiency overview of their current energy consumption before having a tax credit analysis to see if they qualify for the 45L tax credit.
Inquire at Innovative Engineering to see if you qualify!