🔔 The Internal Revenue Service (IRS) recently released Notice 2023-65, which provides guidance on the new energy-efficient housing credit, as modified by the Inflation Reduction Act (IRA).
The provision, as amended by the IRA, allows eligible contractors who construct or substantially reconstruct and rehabilitate new energy-efficient homes a tax credit of up to $5,000 per home:
- The actual amount of the credit depends on eligibility requirements, such as the type of home, the home energy efficiency, and, regarding to multifamily housing units, whether prevailing wage requirements are met.
- Individuals or entities wishing to apply for the credit should consult with a tax professional like us at Wave Tax, to determine whether and how to apply for the credit, and what credit can be used with other tax incentives or federal incentives.
✅ Requirements for Eligible Contractors
To qualify for the credit, contractors must construct or substantially reconstruct and rehabilitate a new energy-efficient home located in the United States. They also must own and have a basis in it during construction, and must sell or lease the home to a person for use as a residence.
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✅ Requirements & Credit Amounts for 2023 and Beyond
Homes must be eligible to participate in certain Energy Star programs and meet applicable energy savings requirements based on the type of home.
For homes purchased between 2023 and 2032, the credit amount ranges from $500 to $5,000, depending on the certification achieved and standards met, including:
- Energy Star program requirements
- Zero Energy Ready Home program requirements
- Prevailing Wage Requirements (for multifamily housing units only)
⚡ Energy Savings Requirements
The energy savings requirements incorporate certain Energy Star requirements and certain Zero Energy Ready Home requirements. For homes purchased in 2023 and after, refer to the tables on the Energy Star website for the minimum Energy Star program versions eligible under Section 45L.
For more information on the relevant Zero Energy Ready Home program in effect, refer to the Department of Energy DOE Zero Energy Ready Home (ZERH) Program Requirements.
✅ Requirements and Credit Amounts Before 2023
For homes purchased before 2023, the credit amount is $1,000 or $2,000, depending on the rules, which include:
- Certifying that the home has an annual level of heating and cooling energy consumption that is at least 50% (or 30% in case of certain manufactured homes) lower than that of a comparable home meeting certain energy standards, with improvements to building envelope components responsible for at least 1/5 (or 1/3 in the case of certain manufactured homes) of the reduction.
- Compliance with certain federal manufactured home standards.
🏡 If you need help with these new tax credits for energy efficient homes, at Wave Tax we can give you a hand on your home or project. 📝 Contact us at info@wavetax.us