Does Your Property Qualify for a $2,000/unit Tax Credit?

[Julio Gonzalez]

If you are an owner, builder or developer of apartment buildings or residential homes, there is an opportunity to earn a tax credit of $2,000/unit or dwelling for energy efficiency. This credit is known as the 45L Tax Credit.

What properties are eligible for this tax credit?

In order to be eligible for this tax credit, your properties must incorporate features that are energy-efficient and the property should be more energy efficient than the national energy standards. You are able to claim this tax credit retroactively for properties that you have built or remodeled within the past three years. Here are a few requirements to be eligible.

• The build date of the property is between August 5, 2005 and December 31, 2021.
• The property is between one and three stories.
• The builders incorporated features that are energy-efficient such as high R value roofing, insulation, HVAC systems, windows and doors.

What are some examples of specific requirements for this tax credit?

• SFH and MFH: From an HVAC perspective, the home must use less than 50% of the energy that a non-energy efficient HVAC home utilizes.
• Rehab Construction:
  • R-19 or higher wall insulation (except for in the Deep South)
  • Insulated sheathing or right foam board
  • If the walls aren’t T-19, HVAC should be SEER 14 (at least) and 95% AFUE
• New Construction:
  • R-19 or higher wall insulation.
  • High quality windows such as Energy Star, U-values (in the North), and Solar Heat Gain Coefficients (in the South)

Who can claim the tax credit?

A qualified contractor can claim this credit including the builder, developer or homeowner. If the contractor was hired by the homeowner to make improvements that are energy efficient, the homeowner is the one who receives this credit.

How do I claim this tax credit?

A certification including a detailed energy analysis is needed to claim this credit. This must be completed by an unrelated third-party licensed professional. Builders and developers should work with licensed engineers to complete this process. After the certification process is complete, your professional should provide you with a certification package that includes all of the necessary documentation in the event of an IRS audit.

This tax credit is great in that it ensures we are building environmentally friendly properties while also creating tax savings that provides greater cash flow to reinvest in other projects or properties.