The New 45L Tax Credit

45L tax credit

What is it?

The Inflation Reduction Act of 2022 is an updated version of the 45L Tax Credit. This contains provisions of a bill that includes some of the most significant climate change actions. The bill states that the 45L Tax Credit is extended through December 2032.

The bill proposes:

  • $9 billion in consumer home energy rebate programs
  • 10 years of consumer tax credits
  • $1 billion grant program
  • Credit for electrical panels
  • 45L Tax Credit extension and improvement

The credit amounts for both single-family and multifamily homes with 3 stories or less are as follows:

  • $2,500 for homes certified as ENERGY STAR
  • $5,000 for homes labeled as DOE Net Zero Ready
  • Up to $1,000 per unit for multifamily buildings

Modifications to the Requirements

Single Family Homes:

The calculation procedure is updated based on DOE energy standards and on the whole house’s performance. For single-family homes, acquired before January 1, 2025, compliance is based on Energy Star v3.1 and are eligible for $2,500. While single-family homes, acquired on or after January 1, 2025, are applicable if a home qualifies for Energy Star v3.2 and the most recent Energy Star requirements applicable to the home’s location. Furthermore, for single-family homes that meet DOE Zero Energy Ready Home requirements, there is a $5000 rebate. On the other hand, if a home meets the Energy Star Manufactured Home National program requirements as in effect on the latter of January 1, 2023, or January 1 of two calendar years before prior to the date the dwelling unit 25 is acquired, they are eligible for $2,500 tax credit.

Multi-Family Homes:

Multi-family homes are eligible for a $500 rebate if they meet Energy Star 3.1 and the most recent Energy Star requirements applicable to the home’s location. Also, if they meet DOE Zero Energy Ready they may be eligible for a $1,000 credit. Conversely, if all laborers and mechanics employed in the construction of the homes are paid at or above the wage for similar construction in the area, multi-family homes are able to receive single-family tax credit levels ($2,500 or $5,000).

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Next Steps

The bill is still in the process but it is highly likely that it will get approved. The extension of the 45L Tax Credit encourages the construction of better-performing homes. This 10-year extension allows people to become more energy efficient and motivate a sustainable future!

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