Energy efficient home credit provides up to $5,000 to home builders for cost-saving upgrades
Washington, D.C. — As part of the Biden-Harris Administration’s Investing in America agenda, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) today released guidance on an important provision of the Inflation Reduction Act that will lower Americans’ utility bills. This program shows the Investing in America agenda in action: lowering energy costs for hardworking families and creating good-paying jobs.
The Inflation Reduction Act extended and enhanced the energy efficient home credit (45L) and allows home builders who construct, reconstruct, or rehabilitate energy efficient homes a tax credit of up to $5,000 per home. Today’s guidance provides clarity to home builders on the qualifications for the credit.
“President Biden’s Investing in America agenda is focused on reducing costs for Americans, and the Inflation Reduction Act is lowering utility bills by providing increased incentives to make homes more energy efficient,” said Deputy Secretary of the Treasury Wally Adeyemo. “Treasury’s guidance provides clarity and certainty to home builders planning construction projects.”
The value of the home builders credit depends on the type of home and the home’s energy efficiency. For multifamily dwelling units, contractors receive the full $5,000 credit only if construction workers are paid a prevailing wage.
To qualify for the credit, homes must be eligible to participate in certain Energy Star programs and meet applicable energy saving requirements based on home type. For homes acquired in 2023 through 2032, the credit amount ranges from $500 to $5,000, depending on whether Energy Star or Zero Energy Ready Home program requirements are met. These programs certify the energy efficiency of a home’s appliances, lighting, insulation, and duct systems, as well as whether the home can accommodate heat pumps and electric vehicles. Homes must be certified by a third-party to verify they meet the requirements.
For homes acquired before 2023, the credit amount is $1,000 or $2,000, depending on the standards met, which include certifying that the home has an annual level of heating and cooling energy consumption that is at least 50% (or 30% for certain manufactured homes) less than that of a comparable home that meets certain energy standards, with building envelope component improvements accounting for at least 1/5 (or 1/3 for certain manufactured homes) of the reduction.
For a full list of the Treasury Department’s work to implement the Inflation Reduction Act, see below:
May 31, 2023: U.S. Departments of Treasury and Energy Release Additional Guidance on Inflation Reduction Act Programs to Incentivize Manufacturing and Clean Energy Investments in Hard-Hit Coal Communities
September 27, 2023: U.S. Department of the Treasury, U.S. Department of Energy, IRS Announce Date for Opening of Applications for Investing in America Program to Spur Clean Energy Investments in Underserved Communities