Section 45L is a $2,000 tax credit for the development, construction, and sale/lease of new single-family homes, townhomes, and apartments in buildings three stories or less. This tax credit was recently extended through the end of 2021. Legislation has been introduced in Congress to extend the tax credit beyond the end of 2021, while increasing both the requirements and the amount. Historically it has always been renewed and has remained in effect since it was first established in 2005.
To qualify, an eligible dwelling unit must have a projected annual heating and cooling cost that is 50% below the annual energy consumption level of a comparable dwelling unit. Additionally, envelope measures (like added insulation or better windows) must account for at least 1/5 of the savings.
While it may not always be cost-effective for every new home to qualify, there are opportunities to leverage local utility company energy efficiency rebate programs to offset costs to qualify.
This is because:
- The efficiency requirements for the tax deduction almost always exceed the minimum efficiency requirements of local utility rebate programs.
- The local utility rebate programs almost always use the same energy modeling software and inspections used for tax deduction.