Breaking down 45L Tax Credit
For qualified owner-occupied or rental dwelling units that meet specific energy-saving standards, the 45L Tax Credit is worth $2,000 per unit. A unit must have been substantially finished after August 8, 2005, and it must remain that way until it is sold or leased before the end of 2022. The developer, also referred to as the Eligible Contractor, must claim the tax credit in the year that the apartment is occupied.
Potential Properties
A dwelling unit or units make up qualifying properties. A living space is referred to as a dwelling unit if it has one or more rooms, including a kitchen, and is intended for use by a single family for sleeping, living, and eating. It must also be 3 stories or less above grade in order to comply with Section 45L’s requirements. Apartments, condominiums, assisted living facilities, student housing dwelling units, townhouses, and single-family homes are all permitted. The buildings’ “each” dwelling unit qualifies for the $2,000 tax credit. Each unit needs to have energy efficiency levels that surpass IECC requirements from 2006. On the basis of current building codes and energy standards, many newer or renovated developments already surpass these requirements. We advise evaluating the 45L Tax Credit for any apartment or condominium project that was developed within the last four years, whether it was new construction or rehabilitation.
What type of contractor is eligible?
A qualified contractor may use the 45L credit in the year that certified dwelling units are leased or sold. Before, there was some ambiguity regarding who met the requirements to be the eligible contractor for the home. For the purposes of 45L, a person or business must be the eligible contractor with respect to the home if they own and have basis in the qualified energy efficient home during construction. The person who hires the third-party contractor is the eligible contractor and the third-party contractor is not the eligible contractor, for instance, if the person who hired the third-party contractor owns and had basis in the home during construction.
Criteria for Certification
Before claiming the energy home credit for the dwelling unit, an eligible contractor must receive certification from a third-party eligible certifier. A person who has been accredited or in some other way authorized by the Residential Energy Services Network (RESNET) or a comparable rating network is an eligible certifier. They are not related to the eligible contractor. The certifier performs computer modeling and on-site testing, creates a certification package, and certifies under penalty of perjury that the information provided in the certification is true, accurate, and comprehensive. The cost of certification is usually calculated per unit.