No Energy Efficiency Tax Credits for new home Owner/Builder/Homeowner?
It seems that there are no federal tax credits available to owner/builders of new homes who chose to exceed building code with energy efficiency measures. Is this correct?
1. The 45L program offered at $2k per home credit to “eligible developers” and was extended through 12/31/21. The program requires that the person taking the tax credit must have had a basis in the home during its construction (ie owned it during construction), which would apply to an owner/builder. However, it also requires that the home be “sold or leased on or before 12/31/21” which obviously would not apply to someone developing their own home.
These two requirements taken together preclude the 45L energy efficiency tax credit being taken by either the builder or the homeowner on a custom home project where the homeowner owns the land prior to, during and after the project and is responsible for their own financing. In fact, IRS notice 2008-35 specifically clarifies that the home must be “Acquired from an Eligible Contractor” and further clarifies “A qualified energy efficient home is not acquired from an eligible contractor if the person that constructed the home retains the home for use as a residence.”
2. The standard Residential Energy Property Credit for Homeowners (25C) efficiency tax credits are not available for expenses related to constructing the home. (p3, answer A4 of IRS publication https://www.irs.gov/pub/irs-drop/n-13-70.pdf)
3. The 25D tax credit for Solar, Fuels cell, wind energy, geothermal and biomass is available, but those measures typically go beyond typical increases in energy efficiency…
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Replies
It takes time until they can develop any laws that could regulate or offer tax credits for energy efficiency. It was a similar situation when electric cars started entering the mass market.
There isn’t one yet, but I am sure the government will soon start incentivizing this matter to make it more attractive for both the construction companies and the future house owners. Especially now, taking into consideration the ongoing price increases and shortage of energy, becoming more efficient will be a necessity and not a preference anymore. Unfortunately, there are no tax deductions, but at least companies such as https://www.thepropertybuyingcompany.co.uk/ will not miss the fact that you are selling an energy-efficient house and offer you a better price for it. At least this was my experience.
It's great that you've done your research and found out about the limitations of the 45L program and the Residential Energy Property Credit. It seems like the 25D tax credit may be an option for some, but it's good to keep in mind that it's geared towards more extensive measures.
I’m aware my response is a bit late, but I’d like to say that it's good to know there are still some tax credits available for energy-efficient measures such as Solar, Fuels cell, wind energy, geothermal, and biomass. I hope that more programs and incentives become available in the future to support sustainable and energy-efficient construction. Additionally, it's always a good idea to keep track of your expenses and have a paycheck stub https://www.paystubcreator.net/ in case you're eligible for any other tax deductions or credits down the line. Thanks for raising awareness about this issue. It's always good to know the limitations and opportunities available for energy-efficient construction.