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IRS Guidance on the Revised 45L Federal Energy Efficient Home Tax Credit

Sep 29, 2023 General


The US Treasury’s Internal Revenue Service (IRS) has released guidance on the federal Energy Efficient Home Tax Credit (45L), which was extended and amended by Congress in the Inflation Reduction Act (IRA).

The IRA extended and enhanced the energy-efficient home credit (45L) and allows home builders who construct, reconstruct, or rehabilitate energy-efficient homes a tax credit of up to $5,000 per home. The IRS’ guidance provides clarity to home builders on the qualifications for the credit and answers many of the questions RESNET® has received since the IRA was enacted.

The IRA extended the credit for ten years and requires that the homes must qualify through either the Environmental Protection Agency’s (EPA) ENERGY STAR for Homes or the Department of Energy’s (DOE) Zero Energy Ready programs.  The value of the credit depends on the program the home is certified under.

For single-family homes, homes certified under the ENERGY STAR program are eligible for a credit of $2,500. Homes meeting the requirements of the Zero Energy Ready program are eligible for a credit of $5,000.

Homes must be certified by a third party to verify they meet the requirements. Because RESNET® is recognized as a Home Certification Organization by DOE and EPA HERS® raters are recognized to provide the necessary verification.

One of the most important clarifications from the IRS is that in order to qualify for the credit the home must be certified as either ENERGY STAR or Zero Energy Ready

In developing the guidelines the IRS sought public input. RESNET® provided its suggestions including clarification of the fact that homes must be certified by the federal programs.

There will be a general session at the 2023 RESNET® Conference in San Diego on the new 45L federal tax credit guidelines featuring Jonathan Passe of EPA and Eric Werling of DOE. For information on the RESNET® conference and to register go to https://resnet.arinex.one/

RESNET® Executive Director Steve Baden commented, “RESNET® worked hard with Congress over the past years advocating for a dependable and effective 45L tax credit. The fruit of this effort was born with the IRA, which included the extension and amending of the federal tax credit.  The IRS has added clarity to the credit’s requirements.

RESNET® recommends that the HERS® industry refer specific questions from their builder clients on the IRS guidelines to the builders’ tax accountants.

To download the IRS 45L guidelines, click here.