Residential Tax Credits for 2023 and Later (updated January 3, 2023)
Here are 5 overviews of items of interest about the 45L residential tax credits and determining compliance beginning in 2023:
- Congress passed a bill titled the Inflation Reduction Act, abbreviated IRA, in August 2022. This legislation provided some information but the IRS needs to release guidance in consultation with EPA and DOE who run the legislated programs. As of the date of this article, the IRS has not released guidance.
- The legislation indicates the credit beginning in 2023, shall increase to
- $2500 for homes “in the case of a dwelling unit which is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes program” or
- $5000 for homes “certified as a zero energy ready home under the zero energy ready home program of the Department of Energy as in effect on January 1, 2023 or any successor program determined by the Secretary.”
- In the case of a home eligible to participate the Energy Star Multifamily New Construction Program, $500 for homes complying with the ENERGY STAR Multifamily program or
- $1000 for such homes certified as a Zero Energy Ready Homes
- Timeframe for versions of ENERGY STAR:
- Single-family site-built homes: “a dwelling unit acquired before January 1, 2025, the Energy Star Single-Family New Homes National Program Requirements 3.1, or in the case of a dwelling unit acquired after December 31, 2024, the Energy Star Single-Family New Homes National Program Requirements 3.2, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the latter of 17 January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired).”
- Manufactured homes: “meets the most recent Energy Star Manufactured Home National program requirements as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired.”
- Multi-family homes: “such dwelling unit meets the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later), and such dwelling unit meets the most recent Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later).’’.
- Prevailing wage of laborers in order to receive the tax credit (language in IRA):
- “the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in the construction of such residence shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such residence is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.”
- EnergyGauge USA Software:
- Programmers are updating the software with the latest versions of ENERGY STAR and ZERH programs after EPA and DOE finalized and released updates. Look for announcements with new software releases in 2023.
- 45L compliance calculations in the current software can continue to be used for qualification of new homes acquired prior to January 1, 2023.
- DOE has indicated they will now rely on the approved providers certification process. EnergyGauge USA is RESNET accredited software and RESNET is one of the ENERGY STAR home program approved home certification organizations.
ENERGY STAR HOMES: Version of ENERGY STAR required by state and date: https://www.energystar.gov/partner_resources/residential_new/homes_prog_reqs/national_page
ENERGY STAR Tax Credit Information: https://www.energystar.gov/about/federal_tax_credits/federal_tax_credit_archives/tax_credits_home_builders
Organizations approved to certify ENERGY STAR homes:
Zero Energy Ready Home Program:
Zero Energy Ready Home Tax Credit Information
Organizations approved to certify DOE Zero Energy Ready Homes (new organization certification program):
DOE Ending Separate Software Approval Process:
ENERGY GAUGE USA FAQ regarding 45L Tax Credit and the use of HVAC Grading
Inflation Reduction Act: The changes to the 45L tax credit can be found in Section 13304 of the Inflation Reduction Act. Section 13304 is titled Extension, Increase, and Modification of the New Energy Efficient Homes Tax Credit (45L). This section begins on pdf page 360 (page may vary with revisions) of this legislation link: Inflation Reduction Act. RESNET has a Summary of 45L changes in the bill also.
Purchase page for EnergyGauge USA: http://www.energygauge.com/energygauge-usa/