Expanded Tax Credit for Energy-Efficient Home Builders
The IRS has announced that eligible contractors who construct or significantly renovate energy-efficient homes may qualify for an expanded tax credit. The potential credit can go up to $5,000 for each qualifying home.
The exact credit amount is contingent on various factors, including the type of home, its energy efficiency, and the acquisition date.
Eligibility criteria for contractors
To be eligible for this tax credit, contractors must:
- Construct or significantly renovate a qualified home.
- Own the home and maintain a basis in it throughout the construction phase.
- Sell or lease the home for residential use.
Home qualification standards
For a home to qualify, it must:
- Be a single-family residence (this includes manufactured homes) or a multifamily home, as stipulated by specific Energy Star program criteria.
- Be situated in the United States.
- Be bought or leased for residential purposes.
- Be certified to fulfill the relevant energy-saving standards based on the type of home and its acquisition date.
Credit amounts for 2023 onwards
For homes acquired between 2023 and 2032, the credit value can vary between $500 and $5,000.
The exact amount depends on the standards met, which encompass:
- Energy Star program criteria.
- Zero energy ready home program standards.
- Prevailing wage requirements.
Credit amounts for homes acquired before 2023
For homes acquired prior to 2023:
- A credit of $1,000 is available if the 30% standard is achieved.
- A credit of $2,000 is available if the 50% standard is achieved.
The standards for these credits include:
- For the 50% standard: The home must have an annual heating and cooling energy consumption that's at least 50% less than a comparable home. Additionally, a minimum of 1/5 of its energy savings should come from building envelope enhancements.
- For the 30% standard: The home should have an annual heating and cooling energy consumption that's at least 30% less than a comparable home.
- Adherence to specific federal manufactured home regulations.
- Compliance with certain Energy Star requirements.
Claiming the credit
Contractors eligible for this credit must ensure they meet all the stipulated requirements before making a claim.
For a comprehensive understanding of these requirements, contractors are advised to consult the Instructions for Form 8908, titled "Energy Efficient Home Credit" or turn to a tax pro.
To claim the credit, they must fill out Form 8908 and include it with their tax return.