What is It?

The 45L tax incentive applies to all newly-constructed, rented or owner-occupied properties. The energy efficiency tax incentive can be claimed by the owner in the year during which the property became occupied.

Originally, 45L tax incentives were available solely for properties purchased and occupied prior to 2014. EXPIRE has changed the rules. The section 45L incentive applies to a big number of construction projects like townhouses, apartments or detached houses.

Who can Claim It?

Eligible contractors are the only individuals that can qualify for the 45L incentive. Several factors determine eligibility.

An eligible contractor is someone who executes projects corresponding to the requirements and has basis in the property during the construction process. For example, a contractor who builds a home corresponding to the 45L tax incentive requirements and who sells or leases it will be an eligible contractor.

Qualification Criteria

Several criteria need to be met for properties to qualify for the incentive.

The energy consumption of the unit has to be at least 50 percent lower than that of a comparable property. At least 10 percent of the energy saving should be produced by the type of building envelope chosen.

Many experts believe that the construction of brand new units makes it a lot easier to address these requirements. Rehabilitation projects are more difficult to execute and the cost of energy-efficient building materials should be taken in consideration.

Tax Incentive Benefits

Applying for 45L tax incentive involves several steps. Detailed energy analysis of the building is the first and the most important part of the process. A certified and independent third party should be responsible for this kind of analysis.

Many companies can help for the preparation of all the necessary documents. Being careful with the paperwork is one of the keys to success with this kind of tax reduction tool.

The filling of an amended tax return will be sufficient to make use of the 45L incentive if a contractor has missed claiming this reduction possibility for prior years.

How about the benefits? These really depend on the size of the project. A bigger number of units will result in a larger sum. A complex that consists of 50 units corresponding to the energy efficiency requirements could provide tax savings of up to 100,000 dollars, for example.

There is one more important benefit connected to 45L tax incentives. Many contractors are already paying attention to energy efficiency and relying on procedures that increase energy savings. As the procedures are becoming the norm, the execution of such construction projects is becoming an easier task.

The 45L tax incentive is just one of the opportunities that contractors involved in energy efficiency projects can benefit from. A focus on such developments results in various additional advantages, which is why are starting to make the transition.

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What is the 45L Tax Incentive?

This incentive is for developers and investors of affordable housing, which can save them thousands of dollars per property. The amount of money saved will change in the coming year and it is important for all developers to make sure they keep an eye on any tax changes. Last year (2013), developers and investors of affordable housing developments could save up to $2000, which was a big help to many building homes in a tough economy. It has many benefits, which will be talked about later in this article. 

Qualifying for an Energy Efficient Tax Incentive

This incentive applies to detached dwellings, townhouses, or apartment buildings and can be claimed by the unit owner within the tax-year. If the owner has apartment buildings, the tax incentive will include each apartment unit and the buildings must meet EPA standards.The unit must have 50% less energy consumption when compared to similar dwellings to qualify. An engineer will inspect the unit to ensure it is up to the EPA regulations in order to qualify for the 45L energy efficient tax incentive.

Multiple Benefits

An affordable housing dwelling that meets the standards of the energy efficient tax incentive for homes will have many benefits. A home may provide more equity for the dwelling owners for Low-income Housing Tax Credit (LIHTC) projects. Developers will receive many tax benefits, as well after a housing unit has been built and is ready for occupants. This tax incentive will also provide developers or investors with the possibility of a short time partnership, helping them to avoid any losses by lessening the equity of the project.

Key Things To Remember

Before attempting to qualify for the 45L tax incentive, developers and investors must make sure the costs of the material will not be too expensive. If the materials are more expensive than the initial project, the tax benefits may not be enough to make up the difference. It is good to have a set budget in mind and then research the materials needed. 

In Closing

Claris Energy understands that qualifying and researching the 45L energy efficient tax incentives for homes can be overwhelming. Claris Energy is a company that will help developers and investors work through the process of the 45L tax incentive, ensuring they qualify or help them find alternative methods that will work best for them. Contact Claris Energy today to learn more.

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