45L Tax Credit for Energy Efficient Homes
Create 45L tax credit certificates for new California homes with Micropas v7.6, U.S. Department of Energy approved 45L software.
Provide added value to your builder clients
Most new California homes qualify for the $2,000 45L credit. Energy Consultants and HERS Raters provide the documentation builders need to claim the credit.
Automatically create 45L docs from your project’s Title 24 info
CF-1R and CF-3R information your team uploads for California Energy Code (Title 24) compliance is used to generate 45L documentation.
45L Plan Pre-Qualification
- A value add for Energy Consultants and Designers to their builder clients
- Documentation demonstrates the energy plan design will be eligible for the $2,000 45L tax credit when constructed
45L Certificate Package
- HERS Raters create and sign this certificate as the Eligible Certifier
- Builders use this package as supporting documentation when claiming the $2,000 tax credit
- Typical fee to builder to complete tax credit work is $200-$300 per lot. This includes the CHEERS certification package.
- Design a custom package for your business
- Available for businesses with large 45L or registry volume
- Volume discounts • multi-product discounts
45L TAX CREDIT OVERVIEW
Under the provisions of the 45L New Energy Efficient Home Tax Credit, builders and developers may claim a $2,000 federal tax credit for each new home that meets 45L energy efficiency requirements. The 45L tax credit can be claimed retroactively for projects completed within the last three years, and any unused credit may be carried forward for up to 20 years. Most new California homes qualify for this $2,000 credit.
45L Tax Credit Basics
The 45L credit is federal tax incentive that promotes the the construction of energy efficient residential buildings (dwellings). The credit is available to builders, developers and others who build homes for sale or lease. It is typically not available to a homeowner who resides at the property.
For the tax credit, an eligible “dwelling” is defined by the IRS as follows:
- Meets the minimum energy efficiency requirements to qualify for the tax credit
- Must be sold or leased prior to January 1, 2021
Many different buildings types qualify for the tax credit:
- Single-family homes (custom & production home developments)
- Multi-family apartment and condominium projects 3-stories above grade and less
- Student & affordable housing projects
- Assisted living facilities
45L Tax Credit Efficiency Requirements
The project’s building features are analyzed with U.S. Department of Energy approved 45L software and certified to claim the 45L tax credit:
- The dwelling must be at least 50% more energy efficient (for the purposes of heating and cooling) than an identical dwelling built to 2006 International Energy Conservation Code standards|
- The project’s energy features (HVAC equipment, windows, insulation, etc.) must be verified by a qualified HERS Rater (Eligible Certifier).
Most California residential building projects qualify for this credit by building to current California code. California’s progressive building energy code (Title 24) is much more stringent than 2006 IECC.
Who Receives The $2,000 Tax Credit?
The person claiming the 45L credit on their tax return must own and have a basis in the qualifying project during its construction. A “person” can be an individual, a trust, an estate, a partnership, an association, a company, or a corporation. Most entities currently claiming the 45L credit are homebuilders and developers.
The IRS terminology refers to this person as an “Eligible Contractor”. This is sometimes confusing as the credit is available to the person who financed and owned the project during construction, not the third-part contractor(s) who were paid to build it.
A key requirement of the tax credit is the Eligible Contractor’s sale (close of escrow) or lease (executed lease/rental agreement) of the applicable home during the taxable year the credit is claimed. The credit is typically not available to the homeowner or person eventually residing in the home.
Eligible Contractors use IRS Form 8908 to claim the 45L tax credit.
The CHEERS Registry 45L Process
CHEERS is California’s largest registry for California building energy code (Title 24) compliance. When a new residential project is uploaded to CHEERS for CF-1R registration, our platform evaluates that project for 45L qualification with MICROPAS v7.6, a Department of Energy approved 45L software. If the project meets the 45L energy savings requirements, a 45L certificate package is made available for review and download.
Frequently Asked Questions
Micropas v7.6 is energy modeling software used to verify compliance with the energy efficiency requirements of the IRS 45L tax credit. Developed by Enercomp, Inc. Micropas has been used by national builders throughout the country since the inception of the 45L tax credit in 2006. Micropas has been seamlessly integrated into the CHEERS Registry; your energy files are automatically checked for 45L qualification as they are uploaded for California energy code compliance.
Micropas v7.6 has been reviewed and approved for 45L tax credit use by the U.S. Department of Energy and can be found on the DOE’s Approved Software list:
As the Energy Consultant on the project, you determine what building energy features will be used to comply with California’s building energy code (Title 24). Energy Consultants can provide an additional, valuable service to their builder, developer, and architect clients by designing the project energy features to also meet 45L efficiency requirements.
During energy file upload for CF-1R registration, the CHEERS registry also evaluates the energy design for 45L qualification via DOE / IRS approved Micropas v7.6. The results are made available immediately. If the project’s energy design meets the 45L efficiency requirements, a 45L Pre-Qualification documentation package (including certificate and 45L analysis results) is made available for download and distribution to your client.
The 45L tax credit provides developers of energy efficient homes and apartment buildings up to $2,000 per dwelling unit. Most projects built to 2016 and 2019 California energy code already exceed these standards and qualify for the 45L tax credit.
For 45L purposes, a HERS Rater acts as the “Eligible Certifier” for the project and generates the 45L Certificate documentation the project owner needs to claim the tax credit. In addition to their normal HERS inspection fees, HERS Raters typically charge a 45L certification fee (per dwelling unit) to provide this documentation.
This person is who the IRS defines as the “Eligible Certifier”. This is typically the project’s HERS Rater.
The Eligible Certifier can not be an employee of the person or entity claiming the 45L tax credit. The Eligible Certifier must be accredited to use energy performance measurement and testing methods. Certified HERS Raters meet this criteria. More information is available at IRS Notice 2008-35 on the IRS website.
The CHEERS Registry allows only the HERS Rater who performed a project’s HERS ratings to create 45L certificates for that project.
Nope, no cost at all. Simply upload your energy file to CHEERS and we’ll tell you the 45L qualification results immediately.
There is a cost associated with creating and downloading a 45L pre-qualification package. This package documents a plan’s energy analysis results via DOE/IRS approved software and is a valuable service Energy Consultants and other energy design professionals provide their builder and developer clients.
No problem at all. Projects registered or HERS tested in another registry can be re-uploaded to CHEERS for 45L certificates only.
In this case, upload the XML energy file originally used for CF1R registration to CHEERS. If the project energy features meet the 45L efficiency requirements, a 45L certificate will be made available to the HERS Rater for review, signature and download. No other CF2Rs or CF3Rs need to be completed.
No, the 45L Tax Credit is per home (per address). The credit does not depend whether other homes in the project qualify.
Yes. In general, tax filings can be amended up to three years from the date of the tax filing. For instance, if a builder filed
their 2018 taxes on 4/15/19, they usually have until 4/15/22 to file a tax amendment to claim the credit. Please consult with a tax advisor regarding your or your client’s specific needs.
Yes. Under 45L, a $1,000 – $2,000 credit is also available for an eligible contractor with respect to a manufactured home. The manufactured home must have a projected level of annual heating and cooling energy consumption that is at least 30-50% below the annual level of heating and cooling energy consumption of a reference dwelling unit in the same climate zone. It must also conform to the Federal Manufactured Home Construction and Safety Standards.
If you have 50+ of these dwellings you’d like to qualify for the $1,000 – $2,000 45L tax credit, please contact sales@cheers45L.com.
Not yet, but soon! We’re working on this now and will make an announcement when ready.
In the meantime, if you have a multi-family project you would like analyzed for 45L qualification, contact sales@cheers45L.com and we would be happy to take a look!
Yes, absolutely! The 45L federal tax credit has been been extended several times in the past. Past and future projects uploaded to CHEERS can always get pre-qualified and generate 45L tax credit certificates.
Current legislation extending the 45L tax credit is making its way through Congress now. As of July 2020, the U.S. House approved an infrastructure legislative package – H.R. 2, “The Moving Forward Act” that contains provisions to extend and modernize the federal 45L tax credit for energy efficient homes.
Section 90424 of the bill addresses the tax credit. Its main provisions are:
- Extends the credit from December 31, 2020 to December 31, 2025
- Changes the benchmark from 50% more efficient than the 2006 IECC to 15% more efficient than the 2018 IECC
- Increases the credit from $2,000 to $2,500
If the energy efficiency requirements to claim 45L credit change, CHEERS will update our U.S. DOE approved Micropas 45L software and ensure a seamless integration into the registry.
CHEERS does not provide tax or accounting advice. Please consult with your tax and accounting advisors for 45L guidance specific to your situation.