45L Tax Credit

45L Tax Credit for Energy Efficient Home

Section 45L or Energy Efficient Residential Tax Credit has been recently extended through the end of 2020.

The tax credit is $2000 per residential dwelling unit.

The Tax Increase Prevention Act of 2014 allows the incentive to be claimed retroactively for all residential developments built within the last three years and any unused credit can be carried forward for up to 20 years. There is no maximum number of units when claiming for the credit as long as your property meets the qualified energy-efficiency standards.

Residential

Who Can Claim the 45L Tax Incentives?

The only person who can claim the incentive is the qualified contractor, commonly the home builder, multifamily developer or taxpayer and must own the property during the time of construction or improvement. A “person” can be an individual, a company or corporation, a trust, an estate, a partnership or association.

The Eligible Contractor

To qualify as the eligible contractor, the taxpayer must own the property and have basis in the qualified energy efficient dwelling unit. The 45L tax credit is available to an eligible contractor in the year the certified dwelling units, are leased or sold. For instance, if the taxpayer hires a third-party contractor to build or upgrade a dwelling unit, that taxpayer is the eligible contractor and not the third party contractor.

Eligible Property or Building Types

  • Single and Multi-family Dwellings (3 stories or less)
  • Apartment Building
  • Residential Condominiums
  • Student Housing
  • Assisted Living Facilities
  • Affordable Housing
  • Production Home Developments

Qualified Energy-Efficient Features

  • HVAC units with SEER 13+
  • Gas furnaces (80%+ efficiency)
  • R-13 – 19 wall insulation
  • Extra insulated foundations/slabs
  • R-38+ roof insulation
  • Vinyl windows and rated low E
  • Double or triple-pane window glass

The Filing Process

The 45L credit is claimed on IRS Form 8908. In order to claim the credit a licensed third-party through must conduct on-site testing and energy modeling to produce a certification package with a declaration that the dwelling unit is 50% more energy efficient than a 2006 IECC reference dwelling unit. The certifier swears that all facts are correct and complete under the penalties of perjury. The certifier must not be related to the eligible contractor. The certifier must be authorized or accredited by a rating network such as (but not limited to) Residential Energy Services Network (RESNET).

Processing 45L Certificate

Here at Specialty Tax Advisors, we perform a thorough and detailed process in evaluating your residential project to provide a quality 45L study, certification, and related documents to assist in claiming a 45L tax credit. Our tax expertise and experience can help you apply and qualify for this advantageous tax incentive.

Pre-Qualification Study

We provide a complimentary pre-qualification study to determine if your building units pass the energy requirements. This pre-qualification study also figures the right amount of tax credits you can claim, and the certification cost.

In performing a pre-qualification study, the following details are needed in order for us to gauge the project and provide more assistance.

  • Name and location of the building units
  • Owner’s legal name
  • Service year of the building
  • Building Plans that consists of the following:
    An architectural plan including specifications, calculations, and other details
    A mechanical plan including HVAC components
    An electrical plan including circuit designs and electrical systems of the building
  • Windows Specifications including U-value and SHGC. U-value is the thermal transmittance through the window while SHGC (Solar Heat Gain Coefficient) is the amount of solar radiation passing through the window. The lower U-value has, the better the insulation properties, and the higher the SHGC value has, the more it provides free solar heating for the home.
  • Mechanical Ventilation including the type, model numbers, and duration of hours used per day. These systems allow air to flow in the building and seeks to improve air quality.
  • The following additional information may be needed if not stated on the building plans: Heating Specifications including AFUE (Annual Fuel Utilization Efficiency), BTUh (British Thermal Unit per Hour), manufacturer, and model numbers. Cooling Specifications including SEER/EER (Seasonal Energy Efficiency Ratio/Energy Efficiency Ratio), BTUh, manufacturer, and model numbers. Water Heater Specifications including manufacturer and model numbers.

Engagement Letter

To proceed with the certification, an Engagement Letter that specifies the scope of the agreement, fees, and terms, is to be approved by the developer. Certification will start as soon as the signed agreement and the downpayment of a 25% certification fee have been made. The down payment is to be used on the certification cost or returns if no units passed the energy efficiency requirements.

Green Building Certification

Building certification is obtained when the following are completed:

  • Energy Efficiency upgrades or remodeling
  • On-site visit for investigating the composition of the building and ensuring no air leakages
  • Computer modeling for analyzing the energy systems of the building

45L Certification Details

Details about the building and the developer are to be specified on the certification document. The following details include:

  • Building units address
  • The legal name of the developer
  • The legal name of the developer
  • Phone number of the developer

Issuing of Certification Package

The certification package consists of the following:

  • Tax certification documents
  • Summary letter
  • Energy Efficiency overview of the every-single unit of the building
  • Recommendations for units that did not meet the energy requirements

Claiming the Tax Credit

After the detailed energy study has been certified and documented, IRS Form 8908 is to be filed by the developer during the service year to claim the tax credit. To learn more about how to process your 45L tax credit, call Mark Harbour at 310-383-1302 or contact via email at mark@specialtytaxadvisors.com.

How We Can Help

Our team of tax and energy modeling experts guarantees that you get the maximum credits. We are unique in that we will not only prequalify the dwelling units for energy efficiency but also help the taxpayer and their accounting team determine the utilization of the credit. We help navigate the taxpayer through the filing requirements and build a file complete with the documentation needed for sustaining an IRS audit. Our multidisciplinary team of engineers conducts on-site testing and computer modeling by using IRS approved software programs.