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45L Tax Credit Requirements for Energy Efficient New Homes

The 45L tax credit allows taxpayers to claim potentially significant credits for the construction of new energy-efficient homes.

The tax credit was retroactively extended from December 31, 2017 to December 31, 2020 by H.R. 1865, Further Consolidated Appropriations Act, at the end of 2019.

Real estate developers can claim $2,000 per dwelling or residential unit on qualifying properties. To be eligible, properties must meet the following qualifications:

  • Properties must be new construction located in the United States.
  • Each dwelling or residential unit must have a projected annual heating and cooling cost that is 50% below the annual energy consumption level of a comparable dwelling unit. This can be done through including energy-efficient roofs, windows, doors, insulation, air conditioners, and other energy-efficient property.
  • Properties must be between one to three stories above grade (not including below-grade parking).
If you have any questions about the 45L tax credit, please contact a member of the Real Estate Services Group.

If a construction project was completed on qualified homes between 2018 and 2020, the project is now eligible for 45L tax credits. Claiming this credit on eligible houses, apartments, condominiums, senior living facilities, and other properties can result in a substantial amount of tax savings. For example, the tax credit on an eligible three-story, 110-unit condominium project for which construction was completed in 2019 and fully sold by 2020 can be claimed in the amount of $220,000 ($2,000 credit x 110 units).

To claim the 45L tax credit, taxpayers must have a 45L Tax Credit Certification completed for each project by an unrelated licensed professional. An engineer familiar with 45L certifications can help evaluate a development project and provide a 45L certification and related documentation to aid in claiming the 45L tax credit.

Amended returns or administrative adjustment requests can be filed to claim the tax credits for prior tax years. Even if there isn’t a tax liability in prior tax years, it can still be worth it to go back and claim the 45L tax credit. The tax credit can be carried forward to future years if it is not usable in the year claimed. Note that the depreciable basis of the property for which the credit is taken will need to be adjusted by the amount of the tax credit claimed.

Author: Amy Lafontaine, CPA | alafontaine@withum.com

Real Estate Services

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