Section 45L Tax Credits For Energy-Efficient Residential Buildings
The 2022 Inflation Reduction Act (IRA) changed Section 45L of the Internal Revenue Code (IRC) to issue tax credits of $1,000-$5,000 per unit for eligible contractors of new or substantially reconstructed homes that follow the ENERGY STAR or Department of Energy (DOE) Zero Energy Ready Home (ZERH) Program. The $1,000 per unit tax credit applies to multifamily homes and the $5,000 per unit tax credit corresponds to single-family and manufactured homes, or multifamily home projects that meet prevailing wage requirements.
To achieve the necessary ZERH certification, buildings should be designed to meet the ZERH requirements.
The amended Section 45L tax credits, outlined below, apply to eligible energy-efficient homes acquired after December 31, 2022, and before January 1, 2033, for use as a residence during the taxable year.
| Section 45L Tax Credit per unit | Requirements |
| $5,000 | This tax credit is for single-family and manufactured homes eligible for the ENERGY STAR Single Family or Manufactured New Homes programs and certified to applicable ZERH requirements. The project can also satisfy the criteria below and meet prevailing wage requirements to earn this tax credit. | $1,000 - $5,000 | This tax credit is for dwelling units that are part of a building eligible for the ENERGY STAR Multifamily New Construction Program and applicable ZERH requirements. |
Contractors should apply to a DOE-recognized organization for ZERH certification. These organizations include:
Home Certification Organizations for the Zero Energy Ready Home Program (HCOs for ZERH)
Multifamily Review Organizations for the Zero Energy Ready Home Program (MROs for ZERH)
Manufactured Homes Quality Assurance Providers for the Zero Energy Ready Home Program (MH QA Providers for ZERH)
Two pathways to achieve certification include the Prescriptive and the ASHRAE-based compliance path. The raters for ZERH Multifamily (ZERH MF) projects will be working under the oversight of EPA-recognized Multifamily Review Organizations (MROs).
The Prescriptive path allows projects to achieve certification following strict guidelines for insulation, mechanicals, and testing.
The ASHRAE path allows certification by conducting whole-building energy modeling based on ASHRAE Standard 90.1. California uses the CA 2022 Title 24 instead of ASHRAE Standard 90.1.
To learn about other tax credits and incentives that apply to your projects, visit the Navigating Energy Efficiency Tax Credits page and diagram.
