IRS Notice N-2023-67 - What You Need to Know

[Julio Gonzalez]

There are constant changes within the U.S. tax code regarding energy-efficient housing and sustainability. Within the real estate and construction industries, IRS Notice N-2023-67 has become a key point.

Why did the IRS release this new notice?

The Inflation Reduction Act (IRA) of 2022 included changes affecting the Section 45L credit such as how much can be claimed, who can claim it and under what conditions. Thus, the IRS released this notice to provide further clarification on the recent updates.

Am I Eligible for the Credit?

There weren’t big changes for the eligibility criteria, but the notice clarifies the nuances that could impact your qualification. To summarize, Section 45L defines “eligible contractors” as either the person who constructs the energy-efficient home, or in the case of manufactured homes, the producer of the home. See (INSERT BP ARTICLE) for further detail on eligibility for the 45L tax credit.

Increase in Tax Credits for Homes That Are Energy Efficient

• $1,000 for multifamily units satisfying ZERH criteria.
• $500 credit for qualifying multifamily units meeting Energy Star requirements.
• $2,500 credit for single-family homes meeting Energy Star requirements for new construction.
• $2,500 credit for multifamily units built in compliance with optional labor standards and meeting ZERH criteria.
• $5,000 for multifamily units meeting optional labor standards and ZERH requirements.
• $5,000 credit for single-family homes built to Zero Energy Ready Home (ZERH) standards.

Does My Home Meet the Efficiency Standards?

There are basically two options:

• Have the Department of Energy’s Zero Energy Ready Home program provide certification to verify that the home is airtight, insulated and designed to produce as much renewable energy as it utilizes.
• For multi-family and single family homes, build to the current Energy Star requirements. There are both region-specific guidelines and national standards that need to be checked when building.

How Do I Prove My Home Qualifies?

There are strict guidelines within the IRS Notice N-2023-67. You will need verification from an impartial third-party stating that your property satisfies Zero Energy Ready Home or Energy Star standards. You will need certified inspectors to first review your plans, then conduct an on-site visit during construction and finally, test the home’s energy use once it has been finished. Be sure to save all of the paperwork related to the verification including any product invoices.

Other great news is that the tax credit has been extended through December 31, 2032. While it may seem daunting, it can be a great piece of your overall tax strategy. If you have any questions, feel free to comment below or reach out to a qualified tax professional.