Earning the new energy-efficient home tax credit

Feature image: The LEED Platinum Faulkner Residence in Dallas. Photo credit: Dave Tonnes-Panaviz.

This article was originally published on the Building Innovation Hub website as "Understanding 45L And How To Earn The New Energy Efficient Home Tax Credit" on June 18, 2024, and is reproduced here with permission. It was co-authored by Building Innovation Hub, USGBC and the D.C. Department of Energy and Environment.

The Inflation Reduction Act (IRA) of 2022 enhances and creates new tax incentives for buildings and energy efficiency programs with the goal of reducing carbon emissions and creating jobs and other economic activity in the United States.

For homebuilders, the new and improved Internal Revenue Code Section 45L New Energy Efficient Home tax credit (45L) under the IRA creates significant new incentives for new or substantially reconstructed energy-efficient homes. The IRA amended and extended 45L to increase the tax credit to up to $2,500 per unit for homes that meet Energy Star certification and up to $5,000 for homes achieving the Department of Energy's Zero Energy Ready Home certification.

The incentive is in effect for 10 years, applying to homes that are acquired-sold or leased-from 2023 through 2032. Multifamily projects only (not single-family or manufactured houses) must meet federal prevailing wage requirements to be eligible for the full $2,500 Energy Star credit per unit and $5,000 ZERH credit per unit.

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