Section 45L Tax Credit

Section 45L Tax Credits $2,000

Examples

  • 100 units at $2,000 per unit equals $200,000
  • 200 units at $2,000 per unit equals $400,000.
Take the section 45L tax credit in the year you install the energy efficiency upgrades.  You can also go back three from your last timely filed tax return.  Right now, that would be the 2018 tax year.
 
Unused credits can be carried back one year and forward 20 years.

What is §45L Energy-Efficient Home Credit

Section 45L tax credit is a credit that offers developers a means to offset the costs associated with building energy-efficient single family or multifamily properties. This credit provides a dollar-for-dollar offset against taxes owed or paid in last three years on property sold or leased.

Who can benefit from 45L Tax Credits?

  • Homebuilders, e.g. developers, flippers
  • Multifamily Developers
  • Real Estate Investors
  • Investors looking to improve their ESG reporting

What types of buildings qualify for 45L Tax Credits?

Check our Frequently Asked Questions for more detail on these credits

More About Section 45L Tax Credits

What is the Process for Claiming the 45L Tax Credit?

The basis for developing and supporting the 45L tax credit is a detailed energy analysis that must be certified by a qualified third-party. Apollo Energies is the third party that will do the certification. Our multi-disciplinary team of engineers and tax experts will ensure that you obtain the maximum tax credits and provide all the documentation necessary to sustain an IRS audit.  We use IRS approved software programs for the IRC Sec. 45L certification.

Qualifying Project Characteristics

  • Project must be three stories or less above ground (not including below-grade parking) and three habitable stories above ground in California.
  • Project must be built on the territory of the United States
  • Project must meet construction standards based on those set by the 2006 International Energy Conservation Code (IECC)¹
  • Project must be completed or acquired after December 31, 2016
  • Construction can include “substantial” rehabilitation and reconstruction

Common Misconceptions

1) The owner of the property wanting the tax credit must have a HERS rating.

This is not true. The owner just needs to hire a third party certifier who is qualified to use the performance measurement methods approved by RESNET (or the equivalent rating network).  It does not have to be a professional engineer or a HERS rater or a Certified Energy Manager but could be.

2) The approved software always produces accurate results.

Yes and no. The phrase garbage in, garbage out certainly applies here. If your certifier is just filling in the boxes and clicking for the results, when the property fails to qualify, they’re done. This is where knowing the building science that can achieve efficiency comes in. When you know how a building operates from an efficiency standpoint, you know what the results should be based on the measurements you took and how the building behaves.

Assume your airflow measured 4.2 air changes per hour (ACH).  That’s a very impressive and positive result.  But how did that affect the heating and cooling loads, or the heat transfer?  It affects it in major ways and can affects the efficiency of your equipment.  Simply having a 16 SEER air conditioner doesn’t mean your system operates as a 16 SEER.  

The software allows you to capture these effects in the calculations.  If you do not know what to capture, the software will fail a structure.

3) My accountant knows taxes so he’s all over this.

A huge misconception is your accountant is automatically handling this credit because they know taxes. Rarely have we found an accountant actively taking advantage of this and more likely has only heard of it.  Let’s fact it, if he was all over this, you’d have heard about it because the significant increase in your cash flow. Id that’s news would come as news to you, they are not taking it.

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