45L Tax Credit for Energy Efficient Homes Extended and Improved

After years of advocacy by RESNET and its allies on extending and reforming the 45L federal tax credit for energy-efficient homes, Congress has passed, and President Biden has signed into law the Inflation Reduction Act.  This important legislative action includes provisions regarding the 45L tax credit, which expired on December 31, 2021.

The changes to the 45L tax credit can be found in Section 13340 – Extension, Increase, and Modification of the New Energy Efficient Homes Tax Credit (45L).  This section begins on page 360 of the legislation that is posted in the Inflation Reduction Act

The key 45L provisions of the law include:

  • Extension of the tax credit for ten years with a new expiration date of December 31, 2032.
  • The existing language for the 45L tax credit was extended through December 31, 2022.
  • Effective on January 1, 2023, the following changes will be made to the tax credit:
    • The tax credit amount will be increased according to the following criteria:
      • $2,500 per home, if the home meets the eligibility standards of the EPA’s ENERGY STAR Single Family New Homes Program.
    • Homes that are certified to meet the DOE’s Zero Energy Ready Home program will qualify for a $5,000 tax credit. DOE’s Zero Energy Ready Homes program requirements are posted at Zero Energy Ready Homes Requirements

The law sets a series of trigger dates in terms of the versions of ENERGY STAR for Single Family Homes must be followed:

  • Dwelling units acquired after January 1, 2023, and before January 1, 2025, will be subject to EPA national program requirements version 3.1. EPA’s version 3.1 is posted at ENERGY STAR Version 3.1
  • Dwelling units acquired after January 1, 2025, will be subject to EPA program requirements version 3.2. EPA’s version 3.2 is posted at ENERGY STAR Version 3.2
  • The legislation states that “… the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired).”

The map of where versions of ENERGY STAR are in effect is posted below:

There are sections of the law where clearer guidance would be helpful.  RESNET is working with the U.S. Department of Energy in seeking clarification guidance from the IRS.  Such guidance will be posted on the DOE’s website.

If you have questions on aspects of the legislation, please submit your inquiries to info@resnet.us  RESNET will refer these questions to DOE in developing its guidance.