Energy efficient dwellings built between December 31, 2017, and December 31, 2020, now qualify for a tax credit, which was renewed under the Further Consolidated Appropriations Act. This credit originally expired in 2017, but can now be claimed for tax years 2018 – 2020 by filing an original or amended return.

The 45L tax credit is available for eligible contractors, defined as a person who builds new energy-efficient or manufactured home and has ownership or basis in the property during its construction. The credit also applies to contractors who develop other living establishments such as senior living, apartments, affordable housing, or student housing.

An energy efficient home is one that meets the requirements set up by the 2006 International Energy Conservation Code. Six requirements must be met:

  1. The new construction must have 50% or less heating and cooling costs per year when compared to a similar home. At least 1/5 of these must be envelope improvements to qualify for the $2k credit or 1/3 to qualify for the $1k credit. Envelope improvements are designed to maintain the indoor environment by isolating it from the exterior environment. This can be achieved through the installation of doors, windows, solar energy, energy efficient roofs, air conditioners, insulation, or other energy efficient property.
  2. The property must be located in the U.S.
  3. The property must be one to three stories (not including below-grade parking).
  4. The home must be constructed by an eligible contractor.
  5. The construction of the home must be completed on or after August 8, 2005.
  6. The dwelling must be purchased between 2006 – 2020 from an eligible contractor and use the home during the tax year.

In order to claim the full or partial credit on Form 8908, an eligible contractor must obtain a certification that the dwelling unit meets the requirements of section 45L(c) from an eligible certifier.

If you want more information on energy credits or need help with tax preparation, contact our tax professionals at The Innovative CPA Group at 203-489-0612. Or contact us online.