Section 45L Tax Credits for Zero Energy Ready Homes
The U.S. Department of Energy (DOE) has announced that builders and developers can now access a $5,000 federal tax credit per home through the amended Section 45L of the Internal Revenue Code. This incentive applies to new or substantially reconstructed homes acquired between January 1, 2023, and December 31, 2032, that meet the DOE’s Zero Energy Ready Home (ZERH) program requirements. The ZERH program emphasizes high-performance homes that are energy-efficient, comfortable, and durable, aiming to offset most or all annual energy use with renewable energy systems.
To qualify for the tax credit, homes must be certified under the ZERH program, which builds upon the ENERGY STAR Residential New Construction program. Certification requires meeting specific criteria, including enhanced insulation, efficient HVAC systems, and provisions for solar readiness. The applicable ZERH program version is determined by the home’s building type and permit date. Eligible contractors—those who constructed, owned, and had a basis in the home during its construction—can claim the credit in the taxable year the home is acquired for use as a residence.
This initiative aligns with the Inflation Reduction Act’s goals to promote energy efficiency and reduce greenhouse gas emissions. By incentivizing the construction of zero energy ready homes, the federal government aims to lower utility bills for homeowners and contribute to a more sustainable housing sector. Builders interested in participating should consult with tax professionals to ensure compliance with IRS guidelines and explore additional resources provided by the DOE.
