§ 45L Tax Credits for Home Builders

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. 
• The term “acquired” is defined by the IRS to include purchase, as well as leasing by a person from an eligible contractor (i.e., builder) for use as a residence during the taxable year. A home is not considered to be acquired if the eligible contractor retains the home for use as a residence. For more information, see Section 5 (Definitions) in the IRS Notice.
• Where EPA has defined a newer version of the ENERGY STAR program requirements applicable to the location, the new version is also deemed to meet these minimum requirements.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.

See also:

• Renewable Energy Tax Credits
• Equipment Tax Credits for Primary Residences
• Tax Deductions for Commercial Buildings