45L Energy Efficient Tax Credit

If you are a developer or contractor who constructs apartments, condominiums, townhouses, assisted-living housing, or single-family homes, and you’re dedicated to going green, you may qualify for the 45L Energy Efficient Tax Credit, and, it’s no small change.

Under Section 45L, eligible builders with qualified dwelling units can receive a $2,000 tax credit per apartment, condominium, townhouse or single-family home. Recent tax legislation has extended the Energy Efficient Home Credit through the end of year 2021.

Find out if you qualify

Eligible Property Requirements

  • Located in the United States
  • Properties must be three stories or less
  • Must incorporate energy efficient features such as high R-Value insulation and roofing, windows, doors, and/or HVAC systems.
  • Completed after August 8, 2005

Potential Candidates

  • Apartment buildings
  • Assisted living housing
  • Residential condominiums
  • Student housing
  • Townhouses (homes)
  • Single family homes

Sample Benefits

  • 45 Units x $2,000 = $90,000 45L tax credits
  • 100 units x $2,000 = $200,000 45L tax credits
  • 189 units x $2,000 = $378,000 45L tax credits

Case Study A

Two-story, 65 unit, multi-family project, fully leased in 2015.  In this project, 100 percent of the units qualified for the credit.

65 Units x $2,000 = 130,000 in 45L tax credits

Certification requirements

An eligible contractor must obtain certification from an eligible certifier before claiming the energy efficient home credit with respect to the dwelling unit. An eligible certifier is a person not related to the eligible contractor that has been accredited or otherwise authorized by the Residential Energy Services Network (RESNET) or an equivalent rating network. The certifier conducts computer modeling and on-site testing and prepares a certification package with declaration that under penalties of perjury the certifier believes that the facts presented in the certification are true, correct and complete. The fee for certification is typically charged on a per unit basis.

Who is the eligible contractor?

The 45L credit is available to an eligible contractor in the year the certified dwelling units are leased or sold. Previously, there was some confusion as to who qualifies as the eligible contractor with respect to the home. For purposes of 45L, a person must own and have basis in the qualified energy efficient home during the construction to qualify as the eligible contractor with respect to the home. For example, if a person hires a third party contractor to construct the home and has basis in the home during its construction, the person that hires the third party contractor is the eligible contractor and the third party contractor is not the eligible contractor.

Taxpayer considerations

  • The 45L credit is a IRC Section 38 business credit
  • General business credits generally are not allowable as a credit to offset Alternative Minimum Tax (AMT)
  • The 45L credit reduces the taxpayer’s depreciable basis

The credit is claimed on the tax return for the year the dwelling units are leased or sold.

Let CSG Strategic Tax Consultants get you the tax credits you deserve for making what you build energy efficient for the environment, and for the people who will call those dwelling units home.

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