How the HERS Index and § 45L Tax Credit Work Together to Reward Energy Efficiency

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Comfort

October 29

In the pursuit of energy-efficient homes, builders and contractors need to be aware of the available tools and incentives that can help them achieve higher performance standards. Two resources revered amongst the high-performance building community assist in evaluating and rewarding energy efficiency in residential construction are the HERS Index and the § 45L Tax Credit. These two elements are closely intertwined, offering both a measure of energy performance and a financial incentive for meeting rigorous efficiency benchmarks.

Here’s how they work together, and how the right products can make all the difference.

What is the HERS Index?

The Home Energy Rating System (HERS) Index is a nationally recognized standard for measuring a home’s energy efficiency. Managed by the Residential Energy Services Network (RESNET), the HERS Index assigns a numerical score to a home based on its energy consumption.

Score of 100

represents the energy use of a standard new home built to the 2006 energy code.

Score of 0

represents a home that has zero net energy use, meaning the home produces as much energy as it consumes.

The lower the HERS score, the more energy-efficient the home is. For example, a home with a HERS score of 60 is 40% more energy-efficient than a typical new home. To achieve a low score, builders typically employ energy-saving technologies, efficient HVAC systems, and improved insulation.

The Role of the § 45L Tax Credit

The § 45L Tax Credit, as part of the Inflation Reduction Act (IRA), offers builders and developers a significant financial incentive for constructing energy-efficient homes. Extended through 2032, the tax credit is designed to reward single-family and multi-family homes that meet or exceed specific energy efficiency standards, as verified through certifications like ENERGY STAR® or DOE's Zero Energy Ready Home (ZERH) program.

For homes built or acquired on or after January 1, 2023, these are the available tax credits:

Single-Family Homes

$2,500 for homes certified to ENERGY STAR® Version 3.1 in climate zones 1 and 2, or ENERGY STAR® Version 3.2 in climate zones 3–8.

Manufactured Homes

$2,500 for homes certified under the ENERGY STAR® Manufactured Home standards (Version 2).

Multi-Family Homes

$500 per unit for homes certified to ENERGY STAR® Version 1.1 for Multi-family New Construction, or $2,500 per unit when prevailing wage requirements are met.

Zero Energy Ready Homes (ZERH)

$5,000 for homes certified under DOE's ZERH program.

To qualify for these credits, homes must demonstrate a substantial level of energy efficiency — often requiring improvements in ventilation, HVAC systems, and insulation.

How HERS and § 45L Work Together

The HERS Index helps determine whether a home qualifies for the § 45L Tax Credit. To claim the credit, builders need to prove that their homes are energy-efficient enough to meet the standards of programs like ENERGY STAR® or ZERH.

A HERS rating is often used to verify that the home meets these thresholds. Certified HERS Raters perform an energy audit and assess the home’s energy performance, assigning a score that reflects the efficiency improvements made through insulation, HVAC systems, ventilation, and appliances.

How Fantech Products Help Lower the HERS Score and Qualify for § 45L Tax Credits

Fantech's range of energy-efficient ventilation solutions can help lower a home's HERS Index, making it easier to qualify for the § 45L tax credit. Here’s how:

Ventilating ECM Fans:

Traditional HVAC systems and exhaust fans powered by AC motors can consume more energy than necessary, raising the HERS score. Fantech's exhaust fans with EC motors are up to 70% more efficient than traditional fans, helping to reduce energy consumption and lower the HERS score by several points.

ENERGY STAR® Certified Products:

Many Fantech products, including bath fans and fresh air appliance systems (ERVs/HRVs), are ENERGY STAR® certified, meaning they meet the strict energy-efficiency guidelines required by the program. These products can contribute to lower energy usage and, therefore, a better HERS rating—sometimes by up to 10-20 points depending on the home’s original score.

Balanced Ventilation with ERVs/HRVs:

Fantech’s Energy Recovery Ventilators (ERVs) and Heat Recovery Ventilators (HRVs) are ideal for improving a home’s overall energy performance by recovering energy from exhaust air. These systems help provide balanced ventilation without compromising on energy loss, leading to a significantly lower HERS Index.

The Financial and Health Benefits of Lowering the HERS Score

Beyond qualifying for the § 45L Tax Credit, lowering the HERS score provides several other advantages:

Energy Savings

Homes with lower HERS scores consume less energy, resulting in lower utility bills for homeowners.

Increased Property Value

Energy-efficient homes with low HERS scores are more attractive to buyers, commanding higher prices on the market.

Better Indoor Air Quality (IAQ)

High-efficiency ventilation systems not only reduce energy consumption but also improve IAQ, providing a healthier living environment.

Maximizing Your Project's Potential

By incorporating Fantech ventilation products, builders can ensure their projects not only meet the strict requirements for the § 45L Tax Credit but also achieve a lower HERS score—leading to greater long-term energy savings, improved indoor air quality, and increased property value.

As the building industry continues to shift towards sustainable and energy-efficient practices, leveraging these tools will be crucial for staying competitive and delivering value to homeowners.

Want more info?

We talk about the updated § 45L Tax Credits, part of the Inflation Reduction Act (IRA), and how benefits have been extended to builders of energy-efficient homes, making it even more critical to install a residential ERV/HRV system.

Power Up Savings: Decoding the New § 45L Tax Credit Update