The Section 45L Energy Efficient Home Credit has provided tax incentives to eligible home builders and contractors who construct energy-efficient residential properties. Created in 2005 and expanded by the Inflation Reduction Act of 2022, the credit offered qualifying businesses an opportunity to reduce their federal tax liability by building homes that meet specific energy-efficiency standards.
An important update for 2026: The One Big Beautiful Bill Act, enacted in July 2025, ended the Section 45L credit for qualified homes acquired after June 30, 2026. Eligible contractors may still need to claim credits for qualifying homes acquired on or before that date, subject to the applicable requirements.
Understanding the credit’s eligibility rules, calculation methods, and filing requirements can help home builders determine whether they qualify for this tax benefit.
Who Is Eligible for the Section 45L Tax Credit?
Section 45L is designed to encourage energy-efficient residential construction. Eligible contractors may claim a credit for qualifying new energy-efficient homes that are acquired from the contractor by a buyer or lessee for use as a residence.
To qualify, a contractor generally must have built or produced the home, maintained a tax basis in the property during construction, and obtained the required energy-efficiency certification before the home was acquired for residential use.
The property must be located in the United States and meet the applicable requirements for its home type and acquisition date. Eligible properties can include:
· Single-family homes
· Multifamily residential units
· Qualifying manufactured homes
Not every energy-efficient property automatically qualifies. The home must meet the relevant program standards and certification requirements under Section 45L.
How Much Is the Section 45L Tax Credit Worth?
The amount depends on when the home was acquired, the type of dwelling, the energy-efficiency certification, and, for certain multifamily properties, whether prevailing-wage requirements were met.
Homes acquired from 2023 through June 30, 2026
Under the expanded rules, qualifying homes could generate a credit ranging from $500 to $5,000 per home or dwelling unit, depending on the applicable program and requirements.
Qualified home or dwelling unit
Potential credit
Eligible single-family or manufactured home meeting applicable ENERGY STAR requirements
$2,500
Eligible single-family or manufactured home certified under the applicable Zero Energy Ready Home requirements
$5,000
Eligible multifamily unit meeting ENERGY STAR requirements without prevailing-wage compliance
$500
Eligible multifamily unit meeting ENERGY STAR requirements with prevailing-wage compliance
$2,500
Eligible multifamily unit meeting Zero Energy Ready Home requirements without prevailing-wage compliance
$1,000
Eligible multifamily unit meeting Zero Energy Ready Home requirements with prevailing-wage compliance
$5,000
These amounts apply only when all relevant requirements are satisfied. Program versions, certification rules, and other technical conditions can affect eligibility.
The Department of Energy’s Zero Energy Ready Home program is now known as DOE Efficient New Homes. Builders should consult current IRS and Department of Energy guidance to determine which program requirements apply to a particular property.
Homes acquired before 2023
Different rules apply to homes acquired before January 1, 2023. Under the former Section 45L provisions, the credit was generally $2,000 for qualifying single-family or multifamily homes meeting the applicable 50% energy-savings standard, or $1,000 for qualifying manufactured homes meeting the applicable 30% standard.
Additional requirements applied to the home’s energy performance and the contribution of building-envelope components to energy savings. The specific rules depend on the property type and the tax year involved.
For historical claims, use the version of Form 8908 and its instructions applicable to the relevant tax year.
How to Calculate the Section 45L Credit
Calculating the credit requires more than determining whether a home uses less energy than a typical property. Builders must identify the rules applicable to the acquisition date and document that the home meets the required standards.
Calculating the credit for homes acquired from 2023 through June 30, 2026
For eligible homes acquired during this period, the amount generally depends on:
· Property type: Single-family, multifamily, or manufactured housing.
· Energy-efficiency certification: Whether the home meets the applicable ENERGY STAR or DOE Zero Energy Ready Home requirements.
· Prevailing-wage compliance: Whether the applicable wage requirements were satisfied for qualifying multifamily properties seeking the increased credit.
· Contractor eligibility: Whether the taxpayer meets the statutory definition of an eligible contractor and had a basis in the property during construction.
· Acquisition and certification timing: Whether the property was acquired for residential use within the eligible period and the required certification was completed beforehand.
For example, a qualifying single-family home certified under the applicable ENERGY STAR requirements could generate a $2,500 credit. A home meeting the applicable Zero Energy Ready Home requirements could qualify for $5,000.
For multifamily properties, the amount can depend on both the certification level and compliance with prevailing-wage rules. Contractors seeking the increased credit must maintain supporting records and complete any additional required forms.
These examples illustrate potential credit amounts; they do not guarantee eligibility for a specific property.
Rules for homes acquired before 2023
For properties acquired before 2023, the former energy-savings tests generally required certain homes to demonstrate that annual heating and cooling energy consumption was at least 50% lower than that of a comparable home meeting the applicable standards. Building-envelope components had to account for at least one-fifth of the reduction in energy consumption.
Certain manufactured homes could qualify under a separate standard requiring at least a 30% reduction in annual heating and cooling energy consumption, with building-envelope components accounting for at least one-third of the reduction. Applicable federal manufactured-home standards also had to be met.
Because these are historical rules, contractors should not apply them automatically to homes acquired under the expanded 2023 provisions.
How to Claim the Section 45L Credit
Eligible contractors generally use IRS Form 8908, Energy Efficient Home Credit, to calculate and claim the credit. The credit is part of the general business credit, so it is generally reported through Form 3800, General Business Credit, as applicable.
The filing process typically involves the following steps:
1. Confirm eligibility. Verify that the contractor, property, acquisition date, and residential use meet the requirements for the applicable tax year.
2. Obtain the required certification. Keep the energy-efficiency certification and related documentation issued by a qualified certifier.
3. Determine the credit amount. Apply the rules and credit amounts for the home’s acquisition date, property type, certification level, and any applicable prevailing-wage requirements.
4. Complete the applicable tax forms. Use the correct revision of Form 8908 and complete any additional forms required for the claim. For certain increased multifamily credits, Form 7220 may be required to document prevailing-wage and apprenticeship compliance.
5. Retain supporting records. Maintain certifications, construction records, acquisition documents, wage records when applicable, and calculations supporting the credit.
Partnerships and S corporations have specific Form 8908 filing requirements. Other taxpayers receiving the credit solely through a partnership or S corporation may report it differently. Consult the applicable form instructions for the relevant tax year.
What Documentation Should Home Builders Keep?
Accurate documentation is essential when claiming the Section 45L credit. Depending on the project and applicable rules, records may include:
· Energy-efficiency certifications and certifier details
· Construction and property records establishing the contractor’s eligibility and basis
· Documents showing when the home was acquired for residential use
· Evidence of compliance with applicable ENERGY STAR or DOE program requirements
· Prevailing-wage and apprenticeship records, when required
· Completed tax forms and supporting calculations
The documentation should establish that the property met the relevant requirements before acquisition and support the credit amount reported on the tax return.
Final Thoughts
The Section 45L Energy Efficient Home Credit has offered eligible home builders a potentially valuable federal tax benefit for constructing energy-efficient housing. However, the rules differ based on the home’s acquisition date, certification, property type, and other requirements.
Because the credit ended for qualified homes acquired after June 30, 2026, builders should pay particular attention to the acquisition date and the tax year being filed. Eligible contractors with qualifying homes acquired by the deadline may still have filing obligations or opportunities to claim the credit under the applicable rules.
Contnow Tax Preparation LLC can help businesses understand tax preparation requirements and identify questions to review with a qualified tax professional. Consult the IRS instructions and relevant guidance before claiming the credit.
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