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45L Tax Credit for Multi-Family, Apartments & Home Builders

The 45L Tax Credit is a valuable tool that provides builders and developers with tax credits for residential and apartment buildings. This credit was extended retroactively in late 2019 for 2018 and 2019 thru December 31, 2020. Any unused credits can be carried forward for 20 years.

This tax credit is equal to $2,000 per residential unit or dwelling (minus cost) to the developers of energy efficient buildings less study cost. Qualifying properties include apartments, condominiums, townhouses, and single-family homes.

This incentive program is a tax credit facility and not a tax deduction facility. It was fabricated for the same intention as the 179D tax provision though it serves small-scale family home builders and not large commercial building contractors. It also provides financial benefits for individuals who purposefully construct their buildings or upgrade them to be energy efficient by cutting usage of power by 50 percent. The standards that applicants are expected to meet are the 2006 International Energy Conservation Code (IECC). The general credit awarded for parties who qualify for this IRS program is 2,000 dollars. To qualify, the residence has to:

  • Be in the United States
  • Be completed before August 8, 2005 and occupied by the time of application. Buildings that date from earlier than August 8, 2005, but have undergone rehabilitation after the set date qualify
  • Satisfy the IRS third party energy inspectors to have met the 50 percent energy saving standard

The 2,000 dollars set for successful applicants are entitled to every dwelling unit. Therefore, if an independent contractor was to construct a building of 20 units, the total of the tax credit awarded to the contractor would be 2,000 dollars multiplied by the total units with occupants at the moment tax returns are filed. Any vacant units do not qualify. However, the one-time incentive can still be claimed in the next financial year for the remaining units once they are occupied. These sums are nonrefundable tax credits. They cannot be paid out if the sum of taxes owed to the IRS reduce and reach zero before the credits and debits balance.

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