Posted by Robert Hancock on 05.14.20
Energy efficient homes are not only better for the environment, but can also lead to cost savings for the renters who live there and the building owners. A significant but often overlooked financial incentive to energy efficient builders and contractors is the 45L tax credit. This tax credit is for owner occupied or rental dwelling buildings that meet certain energy saving standards.
Congress enacted the Protecting Americans from Tax Hikes (PATH) Act in 2015, which made research and development (R&D) tax credits permanent, the legislation also extended the New Energy Efficient Home Tax Credit under Code Section 45L through 2017. Section 45L was originally enacted for the same intention as the 179D tax provision though it serves homebuilders and multifamily developers.
In December 2019, the President signed a $1.4 trillion spending package covering numerous tax extenders, including the 45L Energy Efficiency Tax Credits for multifamily & residential developers which was extended through 2020.
Apartment developers and homebuilders are eligible for a $2,000 tax credit for each new or rehabbed energy efficient dwelling unit that is first leased or sold by the end of 2020. Taxpayers can also amend returns to claim missed tax credits from previous open tax years. The 45L tax credit can be claimed retroactively for all residential and apartment buildings completed within the last four years, and any unused credit may be carried forward for up to 20 years.
To claim the 45L tax credit, the property must meet the following criteria:
Two Noted Differences
There are two main differences in the energy efficiency percentage and code to compare to.
All 45L credits require:
Claiming a Section 45L deduction involves complex calculations and there are certain limitations. It is important that you consult with a tax advisor who has experience with 45L.
Tax Point Advisors applies our national expertise to your local projects by being more hands on and cost effective than many of our competitors. Tax Point Advisors have helped hundreds of companies successfully claim 45L energy tax benefits. On top of that, our accounting experts support your application and provide professional guidance throughout the process.
Tax Point Advisors provides R&D tax credit study services and other specialty tax services to CPA firms and their clients throughout the U.S. To learn more about the 45L tax deductions from the experts at Tax Point Advisors, contact us at (800) 260-4138, or please leave us a message below.