Does a tax credit of $2,000 – $5,000 per home/unit sold or leased sound like something you would be interested in? What if you could go back 3 years to find unclaimed tax credits? Many homebuilders may be unaware of potential tax credits that could translate into significant savings. The 45L home energy tax credit is available to single family and multifamily developers exceeding certain energy standards.

The 45L tax credit is claimed in the tax year each home/unit is first sold or leased and can be claimed retroactively for 3 years depending on the date of filing. The credit can be claimed for newly constructed and substantially renovated homes and apartments. Claiming the credit requires energy modeling, testing, and certification from an eligible certifier.

Below is a typical client who has never taken the 45L Tax Credit and is building 150 homes per year. They were able to claim credits in 2019 – 2022 which resulted in $1.2 million in tax credits.

Tax credits can have a huge impact on your business! As the landscape is changing in 2023 with the 45L Tax Credit stemming from the Inflation Reduction Act, the 45L Tax Credit has transitioned to Energy Star® as the base qualification criteria beginning in 2023, departing from the 2006 International Energy Conservation Code.

In 2023 – 2032, homebuilders and multifamily developers have the opportunity to capitalize on a $2,500 – $5,000 per home/unit sold or leased tax credit. Multifamily developments must meet prevailing wage requirements, or the credit is reduced to $500 – $1,000 per unit. Other opportunities and eligibility that opened up for the 45L through the IRA include:

• Multifamily buildings over 3 stories now qualify
• Mixed-use buildings
• HUD Projects
• Low-Income Housing Tax Credits are no longer reduced by 45L

This article first appeared on BRAYN Consulting's Blog.