Section 45L New Energy Efficient Home Credit (2026)

IRC Sec. 45L provides a credit for each qualifying new energy efficient dwelling unit acquired from an eligible contractor. The Inflation Reduction Act restructured it around ENERGY STAR and Zero Energy Ready Home certification and raised the amounts substantially.

For a multifamily developer completing a 220-unit community, the credit can exceed $1,000,000. It is a credit rather than a deduction, so it reduces tax dollar for dollar.

The Credit Amounts

For single family homes, the credit is $2,500 for a unit certified to the applicable ENERGY STAR program requirements, and $5,000 for a unit certified as a Zero Energy Ready Home under the Department of Energy program.

For multifamily dwelling units, the base credit is $500 for ENERGY STAR certification and $1,000 for Zero Energy Ready Home certification.

Multifamily units that also satisfy prevailing wage requirements receive $2,500 and $5,000 respectively, matching the single family amounts.

That prevailing wage multiplier is a five times increase and is the single most consequential decision on a multifamily project contemplating this credit.

Manufactured homes have their own applicable ENERGY STAR requirements and qualify at the corresponding amounts.

Who Can Claim It

The credit goes to the eligible contractor, defined as the person who constructed the qualified new energy efficient home, or in the case of a manufactured home, the manufacturer.

For a developer who builds and sells, that is the developer. For a developer who builds and holds as rental property, the developer is still the eligible contractor and claims the credit, because the statute requires acquisition by a person for use as a residence, and the regulations and guidance treat a rental unit leased to a tenant as satisfying that.

A person who merely finances construction is not an eligible contractor. Ownership of the property during construction is the operative fact.

The unit must be acquired by a person for use as a residence during the taxable year. For rental property, that means the unit must be leased.

Prevailing Wage on Multifamily

The multiplier requires that laborers and mechanics employed by the taxpayer, contractors, and subcontractors in the construction of the qualified home be paid prevailing wages as determined by the Department of Labor for the locality and type of construction.

Unlike Sec. 179D, the 45L multiplier requires prevailing wage but not the apprenticeship requirements.

This has to be in the contract from the beginning. On a 220-unit project, the difference between $1,000 and $5,000 per unit is $880,000, which typically far exceeds the incremental labor cost.

Documentation requirements are substantial: certified payroll records, wage determinations, and evidence of compliance across all contractors and subcontractors. This is a compliance program, not a checkbox, and it should be administered by someone who has done it before.

Certification

Certification must be obtained from an eligible certifier who is not related to the eligible contractor, using approved procedures under the applicable ENERGY STAR or Zero Energy Ready Home program.

The certifier must be accredited under the applicable program. For ENERGY STAR that generally means a certified HERS rater working within an accredited rating provider network.

Certification is per unit and requires inspection and testing during construction, including blower door and duct leakage testing. It cannot be performed retroactively on a completed and occupied unit in most cases.

That timing constraint is why 45L must be planned before construction rather than discovered afterward. A developer who completes a project without engaging a rater has generally lost the credit.

Basis Reduction and Interaction With Depreciation

Under IRC Sec. 45L(e), the basis of the property is reduced by the amount of the credit allowed.

For a developer holding the units as rental property, that reduces depreciable basis and therefore reduces future depreciation, including the amounts identified in a cost segregation study.

The credit is still substantially better than the depreciation forgone, since a credit reduces tax dollar for dollar while a deduction reduces it at the marginal rate. A $5,000 credit is worth $5,000, while $5,000 of additional basis is worth roughly $1,850 at a 37% rate spread across 27.5 years.

For a developer who builds and sells, the basis reduction affects gain on sale rather than depreciation.

The credit is a general business credit under IRC Sec. 38, subject to the general business credit limitations, with carryback and carryforward available for unused amounts.

Prior Year Claims

Unlike a deduction, a missed credit is not corrected through a change in accounting method. It requires an amended return within the statute of limitations under IRC Sec. 6511, generally three years from filing.

Developers who completed qualifying projects in recent years and never claimed the credit should evaluate amended returns promptly, because the window closes on a rolling basis.

The practical obstacle is certification. Where units were never certified during construction, the credit is generally unavailable regardless of how efficient the building actually is.

Worked Example: 220-Unit Community

A developer builds a 220-unit garden style apartment community and engages a HERS rater at the design stage. All units are certified to the applicable ENERGY STAR multifamily requirements.

The construction contracts include prevailing wage requirements with certified payroll administration across all trades.

With prevailing wage satisfied, the credit is $2,500 per unit, for a total of $550,000. Without it, the credit would have been $500 per unit, or $110,000.

Fifty units are additionally certified as Zero Energy Ready Homes at $5,000 each, replacing the $2,500 amount for those units and adding $125,000.

Total credit is $675,000, reducing tax dollar for dollar.

Basis is reduced by $675,000, which reduces the cost segregation study result correspondingly. On a $46,000,000 project the depreciation forgone is worth roughly $250,000 spread over the schedule, against a $675,000 immediate credit. The credit wins decisively.

Frequently Asked Questions

How much is the 45L credit per unit?

For single family, $2,500 for ENERGY STAR certification and $5,000 for Zero Energy Ready Home. For multifamily, $500 and $1,000 respectively, rising to $2,500 and $5,000 when prevailing wage requirements are met.

Can I claim 45L on rental units I keep?

Yes. The eligible contractor is the person who constructed the home, and a developer who builds and holds still qualifies. The unit must be acquired by a person for use as a residence during the year, which for rental property means it must be leased.

Does 45L require apprenticeship compliance?

No. Unlike Sec. 179D, the 45L multiplier for multifamily requires prevailing wage but not the apprenticeship hour, ratio, and participation requirements. Certified payroll documentation across all contractors and subcontractors is still substantial.

Can I certify units after construction is finished?

Generally no. Certification requires inspection and testing during construction, including blower door and duct leakage testing. A developer who completes a project without engaging an accredited rater has usually lost the credit regardless of actual efficiency.

Does the credit reduce my depreciation?

Yes. Under IRC Sec. 45L(e), basis is reduced by the credit allowed, which reduces future depreciation including cost segregation results. The credit is still far better, since it reduces tax dollar for dollar while the forgone deduction is worth only the marginal rate.

The Section 45L Credit: $2,500 to $5,000 Per Unit for Residential Builders