Unlock Energy Efficiency Tax Benefits with Section 45L

Justice Center – Houston

What is the §45L Tax Credit?

The §45L Energy Efficient Home Credit, as established by the Energy Policy Act of 2005 and extended by the Inflation Reduction Act of 2022, is designed to incentivize the construction of energy-efficient residential properties. This federal provision offers a tax credit of up to $5,000 per dwelling unit to eligible contractors and developers who build or substantially reconstruct residential units that receive ENERGY STAR or Zero Energy Ready Home (ZERH) certifications.

Who Can Qualify for the §45L Tax Credit?

Eligibility for the 45L tax credit extends to builders and developers of new energy-efficient homes or residential units including:

Eligible Taxpayers:

Eligible Properties:

*Beginning 2023, buildings higher than three stories are now eligible in most cases.

Credit Summary/Requirement Table:

Home Type	Qualification Requirement	Prevailing Wage Requirement	2023 Onward	2005 to 2022
Single Family	ENERGY STAR	No	$2,500	$2,000
Single Family	ZERH	No	$5,000	N/A
Manufactured Home	ENERGY STAR	No	$2,500	$1,000
Manufactured Home	ZERH	No	$5,000	N/A
Multifamily	ENERGY STAR	No	$500	$2,000
Multifamily	ZERH	No	$1,000	N/A
Multifamily	ENERGY STAR	Yes	$2,500	N/A
Multifamily	ZERH	Yes	$5,000	N/A

Claim the §45L Credit with Royse Partners

Starting with a complimentary pre-qualification assessment, our process includes a detailed review of construction documents, interviews with your project team, and thorough inspections and testing by our certified HERS raters. We utilize IRS-approved software for energy modeling and prepare all necessary compliance certificates. Additionally, we coordinate directly with your tax preparer and provide audit defense to safeguard your claims. Partner with Royse to optimize your project’s energy efficiency and maximize your tax credit benefits.

Step 1

Discovery Meeting

We begin with a thorough evaluation of your projects to assess eligibility for the credit.

Step 1

Step 2

In-House Inspections

Our HERS-certified raters perform preconstruction energy modeling, site visits, and detailed inspections of all critical components that impact a building's energy performance, such as insulation, HVAC systems, and windows. We also perform various tests to verify energy efficiency, collect data for analysis, and provide actionable feedback to ensure compliance with 45L tax credit requirements.

Step 2

Step 3

Certification Delivery

We utilize IRS-approved software to model your building’s energy efficiency, ensuring compliance with federal guidelines. Our experts meticulously prepare and review certification documents to confirm accuracy. Once finalized, these documents are provided to you, complete with guidance on their use for claiming the 45L tax credit.

Step 3

Step 4

Tax Filing Support

Our project team will work with your tax preparer to prepare and review all necessary documentation to ensure that your tax credit claim is accurate and maximized.

Step 4

Step 5

Final Report and Audit Defense

Upon completion of filing, we provide a final report and stand ready to support your claim during any audits, ensuring long-term security and peace of mind.

Step 5

Common Questions

Yes, substantial renovations that bring a home up to the energy efficiency levels required can qualify, provided all other eligibility criteria are met.

No, there is no limit to the number of eligible units for which the credit can be claimed, as long as energy efficiency requirements are met.

Documentation typically includes detailed construction specifications, energy efficiency reports, certification from a qualified third-party rater, and the IRS Form 8908 used to claim the credit.

A HERS Rater (Home Energy Rating System Rater) is a professional trained and certified to evaluate the energy efficiency of residential homes. HERS Raters conduct inspections and testing to determine a home’s energy performance, which results in a HERS Index Score—a widely used standard for measuring a home’s energy efficiency. They play a crucial role in the certification process for various energy efficiency programs and tax credits, including the 45L tax credit.

If units within a development are sold or leased over two different tax years, the 45L tax credit can be claimed in the tax year each unit is sold or leased, provided it qualifies and meets the energy efficiency requirements. Each unit’s eligibility for the tax credit is assessed independently based on its sale or lease date, ensuring that tax benefits are appropriately timed and claimed.

Both ENERGY STAR and Zero Energy Ready Homes are certifications that denote high levels of energy efficiency, but they focus on different aspects and standards.

ENERGY STAR certification requires homes to be at least 10% more energy efficient than homes built to the 2009 International Energy Conservation Code (IECC) and include additional energy-saving features that typically make them 20-30% more efficient than standard homes.

Zero Energy Ready Homes, on the other hand, must meet more stringent requirements set by the Department of Energy. These homes are so energy efficient that all or most annual energy consumption can be offset with renewable energy, making them effectively “zero energy” if solar panels or other renewable energy sources are installed. This certification implies a higher standard of energy savings and typically includes requirements that exceed those of ENERGY STAR.

The prevailing wage requirement refers to a set of legal standards that mandate paying workers at least the prevailing wage rate for their job classification in the area where the work is performed. This rate is usually determined by the wage paid to the majority of workers, laborers, and mechanics within a particular area. Visit the DOL’s website, specifically the Wage and Hour Division, which administers the Davis-Bacon Act and related acts.