The 45L residential tax credit has recently been extended through the end of 2020. This tax credit is equal to $2,000 per residential unit or dwelling to the developers and/or eligible contractors of energy efficient buildings. This tax credit may be advantageous to developers/owners of SIP built apartment buildings that are 3 stories or less, which meet energy efficiency standards.
Who may qualify for this tax credit?
Originally made effective on 1/1/2006, the extension of the 45L Tax Credit benefits home builders and multifamily developers of qualifying energy-efficient dwellings.
What is a qualifying dwelling?
Residential properties qualified for the credit include single family and multifamily residences with three or fewer above-grade stories. The dwellings must utilize energy-efficient technology.
The unit should provide a level of heating and cooling energy consumption that is significantly less than national energy standards.
Energy efficient features include wall insulation R-13 to R-19 or more, roof insulation R-38 or greater (easily obtained with SIP construction), double/triple pane windows, vinyl low E windows, insulated exterior doors, extra insulated foundations and slabs, air conditioning with SEER ratings 13 and above, 80% or greater efficiency furnaces or hydronic heating systems, and reflective roofing materials.
An eligible developer or contractor must obtain certification from an eligible certifier before claiming the energy efficient home credit with respect to the dwelling unit.
An eligible certifier is a licensed professional that is unrelated to the contractor and has been accredited or otherwise authorized by the Residential Energy Services Network (RESNET) or an equivalent rating network.
The certifier conducts computer modeling, and on-site testing then prepares a certification package.
- The 45L credit is an IRC Section 38 business credit
- The 45L credit reduces the taxpayer's depreciable basis
- The 45L credit is claimed on the tax return for the year the dwelling units are leased or sold
The recent extension of the 45L credit was worded so that there was no lapse in the availability to use the 45L credit. The extension covers qualified residential dwelling units built and put in use prior to December 31, 2020.
Do you qualify?
As a SIP builder, you are already using one of the most energy efficient building systems on the market and may have qualifying projects.
Visit with your tax adviser for more details and to determine your eligibility.
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