You May Be Able to Claim the 45L Tax Credit Retroactively Thanks to the New Home Energy Efficiency Act

The House signed the bill earlier this week and now the Senate has approved for the 45L tax credits to be allowable retroactively for projects placed in service from 1/1/2018 – 12/31/2020.  While this bill does not include fixes to the Tax Cuts and Jobs Act, it does include an extension to 45L. Taxpayers can now amend their 2018 tax return and apply the $2,000 45L credits to their 2018 tax year, or in some situations file a Form 3115 with their 2019 tax return claiming the credits in the current year

Background on 45L

The 45L Tax Credit is an energy-efficient tax credit for residential properties. The tax credit is $2,000 per unit to the developers of energy-efficient buildings. Qualifying properties include:

  • Apartments
  • Condos
  • Townhouses
  • Single-family Homes

All eligible properties must be three stories or lower and have to incorporate energy-efficient features such as roofing, windows, doors or HVAC systems.

New Legislation on 45L

The 45L Tax Credit has been extended many times over the years until it expired at the end of 2017. The Tax Extenders reinstate the credit and incentivize multifamily developers and homebuilders to invest in energy-efficient materials. The bill is retroactive, so tax returns can be amended in 2018 to take the credit. In some situations, it may be possible and more favorable to file a change in accounting method on Form 3115 to claim the credits with the current year tax return rather than amended the 2018 return.

The Anders Real Estate and Construction Group can help determine if your construction project would qualify for 45L or other tax credits and incentives. Contact an Anders advisor to learn more.