New IRS Guidance on 45L Energy Efficient Home Credit

By Hunter Graham, CPA, Tax Manager

New IRS Guidance on 45L Energy Efficient Home Credit

On September 27, 2023, the Internal Revenue Service released new guidance related to the 45L Energy Efficient Home Credit.

What is the 45L Energy Efficient Home Credit?

The 45L Energy Efficient Home credit is a credit for contractors who build or substantially reconstruct qualified new energy efficient homes. Qualified new energy efficient homes can receive a tax credit of up to $5,000 per home.

In our previous article, Homebuilders Can Benefit from Expansion of Energy Efficient Home Credit, we detail the expansion of the energy efficient home credit as a result of the passage of the Inflation Reduction Act of 2022.

Overview of the new guidance

The guidance provided in Notice 2023-65 addresses the person that is eligible for the credit, how to determine the applicable amount of the credit, and requirements.

Contractor eligibility

Eligible contractors must construct or substantially reconstruct and rehabilitate a qualified new energy efficient home located in the United States. They also must own the home and have a basis in it during the construction, and they must sell or lease the home to a person for use as a residence.

Properties that are good candidates for this credit include:

  • Single family homes
  • Any apartment building with 20 or more units
  • Town home
  • Residential condos or assisted living facilities that have been newly built or substantially reconstructed.

Credit amounts and requirements

Credit Amounts for 2023 and Beyond

For homes acquired in 2023 through 2032, the credit amount ranges from $500 to $5,000, depending on the certification achieved and standards met, which include:

Credit Amounts before 2023

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.
  • Meeting certain federal manufactured home rules

Note: The notice also obsoletes Notice 2008-35, 2008-1 C.B. 647, and Notice 2008-36, 2008-1 C.B. 650, which remain applicable for purposes of former § 45L.

Questions on claiming the credit?

We recommend consulting your tax professional to determine whether and how to claim the credit. Your tax advisor can also help determine if the credit can be used with other tax incentives or Federal incentives. Your Keiter Opportunity Advisor and the Real Estate & Construction Tax team are available to answer questions related to your specific property. Contact us. 804.747.0000.

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About the Author

Hunter Graham

Hunter Graham, CPA, Tax Manager

Hunter has 6 Years of experience in public accounting, specializing in tax planning, compliance, and consulting services for flow through entities. His specialty areas include real estate, construction, multi-state, and financial services. Hunter also has experience in manufacturing, professional services, and the technology industry as well as individual income tax, transaction work and business structuring. Hunter is a member of Keiter’s Real Estate and Construction niche team.

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


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