The 45L Credit Is Ending Sooner Than Expected
The passing of the One Big Beautiful Bill made many big changes to the United States tax code. The bill brought back 100% bonus depreciation, which is a major win for developers. However, while the bill added building incentives it also took many away.
One credit that is getting its lifespan cut short by the OBBB is the 45L Energy Efficient Home Tax credit. Originally, authorized through 2032 by the Inflation Reduction Act. Builders will now only be able to claim 45L on buildings acquired before June 30th, 2026. Which cuts the credit’s lifespan short by 8 years.
To qualify, builders would have to have their building completed and residential units bought or leased before June 30th 2026.
Since multifamily projects take about 16 months, many builders won’t finish in time to claim the 45L credit, unless construction has already started
Single family builders will have more opportunities to claim the 45L tax credit before it disappears. But building one unit at a time limits the total credit they can claim before the deadline.
2022 Construction Projects Might Still Qualify
While the future of 45L past June 30th 2026 is up in the air, there is one opportunity that has gone largely unnoticed.
In 2022, the 45L tax credit lapsed. Congress was negotiating the Inflation Reduction Act and did not reauthorize it in 2022. When the IRA was passed in 2023, congress made up for its mistake by retroactively authorizing it for 2022.
What this meant is that for people who built qualified energy efficient homes were unable to initially claim the 45L tax credit, they could claim it through amending an open tax year return and claim after 2022 though.
Open tax years allow filers to look back up to three years from the date they filed their returns; to amend their previous taxes and claim credits or deductions they might have missed at the time.
Many builders who completed projects in 2022, may not be aware that they are still eligible to claim the 45L tax credit. They will have until April 15th or October 15th, 2026 to claim any 45L tax credits that they did not claim in 2022.
2022 was a banner year for new home construction, with almost 1.5 million new homes built in that year since the Great Recession of 2008. That means there is a potential $3 billion dollars in credits left unclaimed assuming all the buildings meet the requirements of an energy efficient building.
At the time buildings can qualify for 45L if they had a 50% reduction in heating and cooling loads compared to 2006 IECC homes. Many homes could have qualified as an Energy Efficient Home in their efforts to meet local code requirements, without ever realizing they can qualify for the 45L credit.
Secure Your Claim Before the 45L Credit Disappears
Any builders who completed homes or multifamily buildings under 3 stories in 2021 and/or 2022, should reach out to Leyton to see if their buildings are eligible for the 45L tax credit.
Leyton’s team will do a complimentary review before any engagement, so builders can feel make the right financial decisions for their company.
