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§45L Energy Efficient Home Credit for Developers

The Energy Efficient Home Credit, as established by the Energy Policy Act of 2005, allows eligible developers to claim a $2,000 tax credit for each newly constructed qualifying residence. Apartment owners are also allowed a $2,000 credit per unit for upgrading existing facilities. This incentive was extended by the American Taxpayer Relief Act and applies to residences sold or leased before 2014.

 

How it Works

An eligible contractor must have constructed a qualified energy efficient home, as well as owned and have had a basis in the home during its construction. An eligible contractor may claim the credit for each home that qualifies for the credit if:

  • It is located in the United States
  • Its construction is substantially completed after August 8, 2005
  • It meets certain energy saving requirements
  • It is sold or leased after 2005 but before 2014 for use as a residence

 

This credit not only includes new construction, but reconstruction and rehabilitation projects. This rule applies to single-family homes as well as condominiums and apartment complexes. Each unit in a condominium or apartment complex may qualify.

Energy Saving Requirements

The credit is $2,000 for a dwelling unit that is certified to have an annual level of heating and cooling energy consumption at least 50% below the annual level of heating and cooling energy consumption

of a “comparable dwelling unit” and has building envelope component improvements that account for at least 1/5 of the 50% reduction in energy consumption.

 

A comparable dwelling unit:

  • Is constructed in accordance with the standards of Chapter 4 of the 2004 Supplement to the 2003 International Energy Conservation Code,
  • Has air conditioners with a Seasonal Energy Efficiency Ratio (SEER) of 13, measured in accordance with 10 C.F.R. 430.23(m), and
  • Has heat pumps with a SEER of 13 and a Heating Seasonal Performance Factor (HSPF) of 7.7, measured in accordance with 10 C.F.R. 430.23(m).

Claiming the Deduction

  • The deduction is available to both new construction and remodeling of commercial buildings performed between 2006 through 2014. Certification must be obtained to verify that the home satisfies specific energy efficiency requirements. Further, certification must be done using an independent, qualified individual to verify and certify that the property installed satisfies specific energy efficiency requirements using IRS-approved software. A site visit is required to verify installation of the energy efficient features. The tax credit is filed using IRS Form 8908, Energy Efficient Home Credit.

How We Can Help

  • Perform free assessments to pre-qualify the property
  • Coordinate with your tax preparer to claim the credit
  • Certify the energy efficiencies, which may require:
    • Review of construction documents;
    • Site visits; and
    • Discussions with building designers, project managers and related personnel.
  • Amend tax returns, if necessary

Success Stories

A taxpayer constructed a 200 unit apartment community made substantial energy efficiency upgrades to the property, and at $2,000 per unit, earned a $400,000 tax credit. The tax credit was used to offset many of the costs for the upgrades. The taxpayer touted having "Green Living" in its marketing materials and literature, which made the property more attractive to prospective tenants.

 

For energy efficiency incentives related to commercial buildings, please click here.

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