45L Tax Credit Case Study on Apartment Complex

[Julio Gonzalez]

Are you familiar with the 45L tax credits available to real estate investors? The 45L tax credit is an energy efficiency tax credit available to owners, builders and developers of apartment buildings, townhouses, condominiums and single family homes. The units must be more energy efficient than the national energy standards. However, many new builds already exceed these standards, so we recommend that any buildings that were developed over the past four years should be evaluated to see if it is eligible for the 45L tax credit. It was expected to end in 2021, however as part of the Inflation Reduction Act, the credit has been extended through 2032. The qualifications and rules for 2022 remain the same, however they will be adjusted starting in 2023.

Here is a case study where an apartment complex owner in North Carolina utilized the 45L tax credit. It can be a huge tax savings tool. Licensed professionals (such as engineers) along with an unrelated third party visited the complex and closely analyzed each unit. They found 165 units that provide a level of energy efficiency that’s higher than national energy standards which qualified the developers for the 45L tax credit! The credit allowed them to claim $2,000 for each of the 165 units totaling $330,000 in tax credits!

Have you had your property assessed to see if it qualifies for the 45L tax credits? If not, what additional questions do you have?