45L Tax Credit - 2023 and Later

[Julio Gonzalez]

What is the 45L Tax Credit?

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. This tax credit was recently extended through 2032.

Major updates happened to the tax credit in 2022, so let’s discuss what the credit looks like in 2023 and later.

How do you qualify?

Mixed-use and residential property must obtain either zERH or ENERGY STAR certification in order to qualify. Additionally, they must meet both regional and national requirements established by the U.S. Environmental Protection Agency (EPA). There is also a 45L credit bonus rate that may be obtained through the “prevailing wage” requirements. Qualified contractors for multifamily properties have the option to claim the higher 45L tax credit if they abide by these requirements. They must ensure that all workers on the multifamily construction project earn income that meets or exceeds the rate of prevailing wages.

What buildings qualify for the tax credit?

• Townhomes
• Triplexes
• Duplexes
• Singel family homes
• Student housing (any size)
• Apartment complexes (any size)
• Assisted living facilities (any sized)
• Manufactured homes

How much is the 45L tax credit?

Type of Home	Energy Star	Energy Star + Prevailing Wages	ZERH	ZERH + Prevailing Wages
Single Family	$2,500	$2,500	$5,000	$5,000
Multifamily	$500	$2,500	$1,000	$5,000

Who can claim the 45L tax credit?

Eligible contractors which are defined as a taxpayer that owns and has basis in the residential building at the time of its construction. You can claim this tax credit on as many qualifying buildings as you own.