45 L Federal Tax Credit

45L Tax Credit – Up to $2000 federal tax credit per address, to use within 20 years!

On Feb. 9th, 2018, the Bipartisan Budget Act was passed, providing a one-year retroactive extension for the Section 45L tax credit for multi-family and residential units. This legislation extended the New Energy Efficient Home Tax Credit under Code Section 45L through the end of 2017. The Code Section 45L credit is the applicable amount for each qualified new energy efficient home which is constructed by an eligible contractor, and acquired by a person from the eligible contractor for use as a residence during the tax year.

In determining whether the dwelling meets the energy savings requirements, the applicable construction standards are based on the 2006 International Energy Conservation Code (IECC). With today’s energy efficient building trends and the fact that the 45L benchmark is based on earlier standards, many current homes can exceed the standards and qualify. The credit is generally $2,000 for a qualifying residence that is:

  • located in the United States,
  • was substantially completed after a tax year inside the statute of limitations and before December 31, 2017, and
  • meets the energy savings requirements of Code Section 45L(c). To meet this requirement, the dwelling must generally be certified in accordance with guidance prescribed by the IRS to have a projected level of annual heating and cooling energy consumption that meets the standards for the 50% reduction in energy usage.

Eligible construction also includes substantial reconstruction and rehabilitation. Home builders and developers can still claim the 45L tax credit retroactively if they did not claim them on previous tax returns so all residential developments and apartment buildings completed within the last 4 years are worth assessing for potential 45L tax credits.

As part of the New Energy Efficient Home Tax Credit under Code Section 45L, a $1,000 credit is also available for an eligible contractor with respect to a manufactured home. The manufactured home must have a projected level of annual heating and cooling energy consumption that is at least 30% below the annual level of heating and cooling energy consumption of a reference dwelling unit in the same climate zone. It must also conform to the Federal Manufactured Home Construction and Safety Standards.

Benefits of the energy efficient home credit

The 45L credit can have substantial value, as demonstrated by these case studies:

Case study A

Three-story, 83-unit, multi-family project, fully leased in 2017. In this project, 100 percent of the units qualified for the credit.

Tax credit ($2,000 x 83 units) $166,000
Project certification fee ($400 x 83 units) $33,200
Net benefit $144,000
Case study B

Four-story, 106-unit, multi-family project, fully leased in 2017 but first level was below grade parking. In this project, 90 of 106 units (or 85 percent) qualified.

Tax credit ($2,000 x 90 units) $180,000
Project certification fee ($400 x 90 units) $36,000
Net benefit $144,000

The Steps to Complete the Rebate Process

Model plans in EnergyPro v4.7. MF projects must be modeled per plan, not by building.

Complete Client Tax Credit Worksheet (CTCW) provided by H4H & CHEERS (the HERS Provider).

Once the models are completed H4H will forward the documents to CHEERS, who will review the inputs for accuracy and for all lots that qualify and then provide a 45L FTC project summary list of qualifying lots and a CHEERS 45L FTC lot certificate for each qualifying lot.

Each CHEERS 45L FTC certificate will need to be signed by the eligible HERS certifier from Hope for Homes. https://hope4homes.net/contact/

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