§45L Tax Credit

Detailed §45L Tax studies by the experts to maximize depreciation.

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    §45L Energy-Efficient Home Credit

    Section §45L is a little-known tax credit that offers developers a means to offset the costs associated with building energy-efficient single family or multifamily properties. The credit provides a dollar-for-dollar offset against taxes owed or paid in the tax year in which the property is sold or leased.

    What is the §45L Tax Credit?

    The Internal Revenue Code (IRC) Section §45L is a $2,000 per dwelling unit ($1,000 for manufactured homes) tax credit for each new energy-efficient home which is constructed by an eligible contractor and acquired by a person from the eligible contractor for use as a residence during the tax year. The credit can be taken on amended returns or carried forward up to 20 years.

    The IRS requires that a §45L analysis be conducted by a certified third-party using IRS-approved modeling software. A dwelling unit must be certified to provide a level of heating and cooling energy consumption that is at least 50 percent below that of a comparable dwelling unit constructed in accordance with the standards of either the 2003 IECC or 2006 IECC (depending on the year sold or leased). It also must have building envelope component improvements that provide for a level of heating and cooling energy consumption that is at least 10 percent below that of a comparable dwelling unit.

    Extended for 10 years through 12/31/2032.

    Units leased or sold in 2022 use the existing standards.

    Units leased or sold in 2023 and later switch to ENERGY STAR standards with an increase in tax credit to $2,500 or $5,000. ENERGY STAR certification is the pathway to qualify for the 45L tax credit.

    Who Can Benefit from the §45L Tax Credit?

    Homebuilders, single family or multifamily developers can benefit from the §45L Tax Credit.

    Which Energy-Efficient Buildings Qualify for the §45L Tax Credit?

    The following energy-efficient buildings qualify for the §45L tax credit:

    Residential Condominiums

    Apartment Buildings

    Affordable Housing

    Residential Buildings Undergoing Remodeling

    Student Housing

    Assisted Living Facilities

    The Source Advisors Approach to Claiming the §45L Tax Credit

    Phase I – A complimentary review of the property which includes detailed engineering takeoffs and modeling with IRS approved software.

    Phase II – A field test to confirm that the property qualifies per IRS and IECC guidelines.

    Tax Forms and Certifications – All required forms and certifications to be filed with the tax return.

    Fees – Based on the number of units that actually qualify for the credit

    Our §45L team includes tax and engineering professionals who are certified to perform §45L analyses and use IRS-approved software. Our team also includes former Big Four CPAs, a certified energy rater, and a former IRS tax attorney with in-depth experience in sampling protocol. The §45L tax credit can provide significant tax savings for developers with large-scale projects – Our approach is designed to make exploring the credit virtually risk-free.

    The Source Advisors Approach to Claiming the §45L Tax Credit

    Property Type Floors Units $/Unit Potential Tax Credit
         Single Family Home 1 1 $2,000 $2,000
         Housing Development 1 & 2 100 $2,000 $200,000
         Apartment Complex 3 150 $2,000 $300,000
         Residential Condo Development 3 200 $2,000 $400,000