§ 45L Tax Credits for Home Builders
Federal Tax Credits for Builders of Energy Efficient Homes
As part of the Inflation Reduction Act (IRA), the Section 45L New Energy Efficient Home Credit (§ 45L credit) has been updated and extended through 2032. For eligible homes and apartments (referred to as dwelling units in § 45L) acquired on or after January 1, 2023, the tax credit is now specifically tied to certification to an eligible version of the relevant ENERGY STAR program requirements.
On September 27, 2023, the Internal Revenue Service (IRS) issued Notice 2023-65, which contained guidance for taxpayers on the § 45L credit as amended by the IRA. A summary of available credits, key points from the Notice, and minimum ENERGY STAR program versions eligible for the § 45L credit are provided below.
Individuals or entities looking to claim the credit should consult with a tax professional to determine whether and how they can claim the credit and determine whether the credit can be used with other tax incentives or Federal incentives.
Summary of Available Credits for ENERGY STAR Certification:
- Single-Family Homes - $2,500 available for homes certified to eligible ENERGY STAR Single-Family New Home (SFNH) program requirements.
- Manufactured Homes - $2,500 available for homes certified to eligible ENERGY STAR Manufactured Home (MH) program requirements.
- Multifamily Homes - $500 available for homes certified to eligible ENERGY STAR Multifamily New Construction (MFNC) program requirements, with a larger tax credit ($2,500) available when prevailing wage requirements are met.
Note that a larger tax credit is also available for homes that are certified to DOE's Zero Energy Ready Home (ZERH) Program.
Key Points from IRS Notice 2023-65:
In Notice 2023-65, the IRS clarified that:
- The phrase "meets ENERGY STAR program requirements" means that a home must be certified.
- Where EPA has defined a newer version of the ENERGY STAR program requirements applicable to the location, the new version is also deemed to meet these minimum requirements.
- For example, a home that is certified to the National SFNH v3.2 program requirements also meets the National SFNH v3.1 program requirements.
- A dwelling unit built in a location where EPA has defined regional program requirements must meet both national and applicable regional ENERGY STAR program requirements to qualify for the § 45L credit.
- Note that EPA addresses this requirement, which conflicts with prior EPA policies, via a new 'deemed certification' policy detailed below.
- Homes in U.S. territories (i.e., Puerto Rico, U.S. Virgin Islands, Guam, and the Northern Mariana Islands) are not eligible for the § 45L credit.
- Note, however, that under EPA policy, these homes can still earn ENERGY STAR certification.
ENERGY STAR Policies Related to the § 45L Credit:
ENERGY STAR program requirements, eligibility requirements, and applicability of national and regional program requirements can be found on the ENERGY STAR Program Requirements webpage.
In support of the implementation of the § 45L credit and IRS Notice 2023-65, EPA has adopted new policies related to the defined effective dates of program requirements, deemed certifications for national and regional program requirements, and accepted documentation of ENERGY STAR certification as detailed in the document below. Note that these policies are solely for the purpose of the § 45L credit and do not modify the normal procedures of the ENERGY STAR New Construction programs nor the technical requirements that dwelling units must meet to earn ENERGY STAR certification.
- ENERGY STAR Policies in Support of § 45L Credit (PDF, 1.6 MB)
In addition, partners should also be aware that, in some cases, a home may be certified as ENERGY STAR using a version of the program requirements that is not eligible for the § 45L credit. For example, in 2023, § 45L requires that a dwelling unit be certified to MFNC National v1.1 program requirements to be eligible for the tax credit; however, in many states, EPA allows homes to be certified as ENERGY STAR using the MFNC National v1.0 program requirements. See the ENERGY STAR Program Requirements webpage for more information.
Minimum ENERGY STAR Program Versions Eligible for the § 45L Credit:
The tables below reflect the minimum ENERGY STAR program versions that are eligible for the § 45L credit for acquisitions beginning in 2023 as governed by EPA's defined effective dates and the timelines established in § 45L. Program version eligibility for future years will be provided annually in January.
| State/Territory | Single-Family | Manufactured | Multifamily |
|---|---|---|---|
|
AL, AK, AR, AZ, CO, CT, DC, DE, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, PA, RI, SC, SD, TN, TX, UT, VA, VT, WI, WV, WY |
SFNH National v3.1 | MH v2 | MFNC National v1.1 |
| CA | SFNH California v3.3 | MH v2 | MFNC California v1.3 |
| FL | SFNH Florida v.3.1; or SFNH National v3.1 | MH v2 | MFNC National v1.1 |
| HI | SFNH Pacific v3 | MH v2 | MFNC National v1.1 |
| OR, WA | SFNH Oregon and Washington v3.2; or SFNH National v3.2 | MH v2 | MFNC Oregon and Washington v1.2; or MFNC National v1.2 |
| State/Territory | Single-Family | Manufactured | Multifamily |
|---|---|---|---|
|
AL, AK, AR, AZ, CO, CT, DC, DE, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, PA, RI, SC, SD, TN, TX, UT, VA, VT, WI, WV, WY |
SFNH National v3.1 | MH v2 | MFNC National v1.1 |
| CA | SFNH California v3.3 | MH v2 | MFNC California v1.3 |
| FL | SFNH Florida v.3.1; or SFNH National v3.1 | MH v2 | MFNC National v1.1 |
| HI | SFNH Pacific v3 | MH v2 | MFNC National v1.1 |
| OR, WA | SFNH Oregon and Washington v3.2; or SFNH National v3.2 | MH v2 | MFNC Oregon and Washington v1.2; or MFNC National v1.2 |
| State/Territory | Single-Family | Manufactured | Multifamily |
|---|---|---|---|
|
AL, AK, AR, AZ, CO, CT, DC, DE, FL, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, PA, RI, SC, SD, TN, TX, UT, VA, VT, WI, WV, WY |
SFNH National v3.2 | MH v2 | MFNC National v1.1 |
| CA | SFNH California v3.3 | MH v2 | MFNC California v1.3 |
| HI | SFNH Pacific v3 | MH v2 | MFNC National v1.1 |
| OR, WA | SFNH National 3.2 | MH v2 | MFNC Oregon and Washington v1.2; or MFNC National v1.2 |
| State/Territory | Single-Family | Manufactured | Multifamily |
|---|---|---|---|
|
AL, AK, AR, AZ, CO, CT, DC, DE, FL, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, PA, RI, SC, SD, TN, TX, UT, VA, VT, WI, WV, WY |
To be determined | To be determined | MFNC National v1.1 |
| CA | To be determined | To be determined | MFNC California v1.3 |
| HI | To be determined | To be determined | MFNC National v1.1 |
| OR, WA | To be determined | To be determined | MFNC Oregon and Washington v1.2; or MFNC National v1.2 |
* For the multifamily sector, eligible versions are determined for acquisition dates through 2026 because the applicable lookback clause in § 45L(c)(3) specifies the version in effect “three calendar years prior to the date the dwelling was acquired.” In contrast, because § 45L(c)(2) specifies a two-year lookback for the single-family and manufactured home sectors, the eligible versions applicable to 2026 acquisitions in those sectors will be determined on/after January 1, 2024.
See also:
