Overview of Amended Section 45L

The Inflation Reduction Act of 2022 significantly amended Internal Revenue Code Section 45L to enhance tax credits for eligible contractors constructing new or substantially reconstructed homes that meet specific energy efficiency standards. Here's a detailed overview of the updated provisions:

Under the new guidelines, Section 45L now provides two tiers of tax credits for homes meeting either the ENERGY STAR or Department of Energy (DOE) Zero Energy Ready Home (ZERH) program standards:

  1. Higher Credit Tiers:

    • $5,000 Tax Credit: Awarded for single-family and manufactured homes that are:
      • Eligible under the EPA's ENERGY STAR Single Family New Homes or the ENERGY STAR Manufactured New Homes Program.
      • Certified according to the ZERH program requirements.
    • $5,000 Tax Credit for Multifamily Units: Applies to dwelling units within buildings eligible under the EPA's ENERGY STAR Multifamily New Construction Program, provided they meet the ZERH standards and the project complies with prevailing wage requirements.
    • $1,000 Tax Credit for Multifamily Units: Offered for units meeting the same criteria as above but without prevailing wage compliance.
  2. Credit Eligibility Timeline:

    • The credit is applicable to qualified energy-efficient homes acquired for use as residences between January 1, 2023, and December 31, 2032.

ZERH Program Applicability for the 45L Tax Credit

To qualify for the 45L tax credit under ZERH certification, the following conditions must be met:

  • Certification Compliance: The home or dwelling unit must be certified to meet ZERH program standards as detailed on the ZERH Program Requirements webpage.
  • Eligible Contractors: Only certain builders identified as eligible contractors can claim the credit.
  • Acquisition Criteria: The home or dwelling unit must be acquired (bought or leased) from an eligible contractor and used as a residence during the taxable year in which the credit is claimed.

Program Version Effective Dates for ZERH

The DOE develops and updates ZERH program requirements for various housing sectors, with specific effective dates based on the permit or production date of the housing project. These effective dates determine the applicable ZERH program version for the purpose of claiming the 45L tax credit.

For a comprehensive understanding and to ensure compliance with these amended guidelines, contractors and stakeholders are encouraged to refer to both the ZERH and IRS websites for detailed program requirements and eligibility criteria.

This structured breakdown of the amended Section 45L should provide contractors with clear insights into how they can benefit from these enhanced tax credits while contributing to energy-efficient building practices.

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