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Frequently Asked Questions about the 45L Home Energy Tax Credit

Congress has renewed the $2000 Tax Credit for new Energy Efficient homes.  This valuable tax credit is available to home builders and is retroactive to 1/1/2018.

About the Tax Credit

How much does it cost?
Our fee is $150 each for the first 10 homes and $100 each for additional homes..

How Does a Home Qualify for the $2000 Tax Credit?
A home must use no more than 50% of the energy used by a home built to 2006 International Energy Conservation Code (IECC) standards.

How Does a Builder Determine If Their Homes Will Qualify for the Tax Credit?
The only way is to have an analysis done using one of the approved IRS software programs. Under the provisions for the energy efficient homes tax credit, an eligible contractor who constructs a qualified new home may qualify for the credit. For specific qualifications to be eligible for the tax credit please consult with a qualified tax adviser.

What Form Must a Builder Complete the Tax Credit?
IRS Tax Form 8908

Is the Form Complicated to Complete?
No. The contractor simply enters the total number of qualified homes and multiples that amount by $2,000.

Do Homes Eligible for the Energy Star Label Also Meet the Requirements for the Tax Credit?
No. The requirements to meet Energy Star and the tax credit are different. Qualification for Energy Star covers all energy use in a house, including water heating, lighting and appliances, while requirements for the tax credit only include space heating and cooling.

Which contractors are eligible for the new home tax credit?
An "eligible contractor" must own and have a basis in the home during its construction to qualify for the credit.  For specific qualifications to be eligible for the tax credit please consult your tax adviser.  

What qualifies as a new energy efficient home?
A home qualifies as a new energy efficient home if it is located in the United States, it was completed after August 8, 2005 and before December 31, 2020, and it meets the energy saving requirements of IRS Code Section 45L (c), and it is acquired by a person from the eligible contractor for use as a residence.

Is the tax credit available for remodeled homes?
Yes. For purposes of the energy efficient home credit, construction may include substantial reconstruction and rehabilitation.

Can a builder certify their own homes for the tax credit?
No. Homes must be inspected and tested by an "eligible certifier".

Can only home energy raters certify homes for the tax credit?
No. The IRS rules also recognize "an employee or other representative of a utility or local building regulatory authority may qualify as an eligible certifier if the employee or representative has been accredited or authorized by RESNET (or the equivalent rating network) to use the approved energy performance measurement methods"

What documentation must a builder have to apply for the tax credit?
The builder must obtain a signed document from the eligible certifier stating "Under penalties of perjury, I declare that I have examined this certification, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of this certification are true, correct and complete."  The IRS recommends that the builder retain the certification as part of the contractor's record to document that the home meets the requirements.

Can a homeowner apply for the tax credit?
No. Only eligible contractors can apply for the tax credit.

Can homes be verified for the tax credit using the "sampling" method?
Yes. The IRS allows for "sampling" as long as the certifier follows the current EPA Homes Sampling Protocol Guidelines.  The certifier must also sign the required statement certifying compliance.

Are multi family homes eligible the tax credit?
Yes. The IRS defines all homes are eligible for the tax credit as long as the building is not more than three stories above grade in height.

The IRS rules state that the tax credit is $2000 per qualifying dwelling unit.  How does the IRS define a "dwelling unit"?
The IRS defines a dwelling as a "single unit providing complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, eating, cooking and sanitation.

What is the difference between a tax credit and tax deduction?
Tax deductions reduce the tax payer's overall taxable income with the value of the deduction dependent on the payer's tax bracket. Tax credits reduce the amount of tax a taxpayer owes dollar for dollar.  Tax credits are more economically powerful than deductions. 

Call us today to find out more about the 45L tax credit.