Section 45L Tax Credits
Tax Credit Improve Return On Investment
Inflation Reduction Act of 2022
The Inflation Reduction Act extended the 45L credit for homes sold or leased during 2022 with little modification. However, from Jan. 1, 2023 through Dec. 31, 2032, the tax credits jumps significantly to $2,500.
What Changed Exactly
For tax year 2022 and prior, nothing changed. The tax credit is still $2,000 per unit, and the criteria is 50% better than a home built to the 2006 IECC standard. You can always go back three years and amend your prior year returns and pick up the $2,000 tax credits for units improved in those prior years.
But for 2023 the tax credit increases to $2,500 and you need to get ERI score greater than the ERI score of an Energy Star reference home.
How To Qualify
- Single-Family Homes
- The home earns an Energy Star Energy Rating Index (ERI) score equal to or lower than the Energy Star Reference Design House.
- This means getting a better UA score than the 2012 IECC.
- Applies to all new construction, rehabilitations, renovations, and manufactured homes.
- 45L is available to those owners and investors who rehabilitate or renovate houses or apartments.
- FUN FACT: Energy Star Certification is not required.
- Multifamily New Construction
- Exact requirements as Single Family.
- The tax credit drops to $500 per unit unless you pay the prevailing wage
- Pay prevailing wage, and the tax credit increases to $2,500 per unit.
- Applies to both low-rise and high-rise multifamily properties.
- FUN FACT: Section 42, the Low-income Housing Tax Credits (LIHTC), no longer need to adjust their basis.
- Prevailing Wage (pay attention to this)
- Prevailing Wage is not an employee wage, it is a task-based wage.
- You count the wage according to the task, not the wage you pay the employee.
- You do not need to have be associated with an apprenticeship program.
- You can pay your normal wage and end up with a prevailing wage overpayment.
Who Qualifies
- Homeowners who sell or lease their vacation homes.
- Homebuilders
- Multifamily Developers, property owners
- Real Estate Investors who want to improve their property values
- Investors looking to improve their ESG reporting
Properties That Qualifies
- Low-rise residential homes
- Affordable housing (LIHTC)
- Apartment buildings
- Assisted living facilities
- Student housing
- Both substantial reconstruction and rehabilitation projects
Our multi-disciplinary team of engineers and tax experts will ensure that you obtain the maximum tax credits and provide audit protection for all our certifications.