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Power Up Savings: Decoding the New § 45L Tax Credit Update
Reading time: 3 minutes
Comfort
Enhancing HVAC systems is key in achieving energy efficiency and improved indoor air quality in residential and light commercial construction. The updated § 45L Tax Credits, part of the Inflation Reduction Act (IRA), expand the benefits available to builders of energy-efficient homes. This change highlights the need of implementing residential ERV (Energy Recovery Ventilator) and HRV (Heat Recovery Ventilator) systems and supports sustainable building practices while maximizing energy performance and healthier living spaces.
What’s New with § 45L Tax Credits?
The Section § 45L New Energy Efficient Home Credit has been revised and extended until 2032. For homes and apartments purchased on or after January 1, 2023, certification to a qualifying version of the ENERGY STAR® program requirements is now required to qualify for the § 45L tax credit.
Key Benefits by Home Type:
Single-Family Homes:
$2,500 available for homes certified as eligible ENERGY STAR® Single-Family New Home (SFNH) program requirements.
Manufactured Homes:
$2,500 available for homes certified as eligible ENERGY STAR® Manufactured Home (MH) program requirements.
Multi-family Homes:
$500 available for homes certified as eligible ENERGY STAR® Multi-family New Construction (MFNC) program requirements, with a larger tax credit ($2,500) available when prevailing wage requirements are met.
Enhanced Credit for Zero Energy Ready Homes
A higher tax credit is also offered for homes that meet the certification requirements of the DOE's Zero Energy Ready Home (ZERH) Program. This incentive is designed to motivate builders to pursue more ambitious energy efficiency standards and create homes that are closer to net-zero energy use.
Certification and Eligibility
To be eligible for the § 45L tax credit, homes must comply with specific ENERGY STAR® program requirements. Certification must align with the versions set by the EPA's effective dates and follow the transition timelines detailed in § 45L.
Important Clarifications:
Homes must be ENERGY STAR® certified to meet the tax credit requirements.
The term "acquired" includes both purchase and leasing for use as a residence during the taxable year.
Eligible contractors must own the home during construction and sell or lease it for residential use to qualify.
Homes in U.S. territories are not eligible for the § 45L credit but can still earn ENERGY STAR® certification.
After 1/1/25 (permit date) sampling will no longer be allowed. If a building has multiple dwellings, both of them must be certified.
EPA’s New Policies for § 45L Credit
To support the § 45L credit, the EPA has introduced new policies regarding the effective dates of program requirements, deemed certifications for national and regional program standards, and accepted documentation for ENERGY STAR® certification. These policies are specifically tailored for the § 45L credit and do not impact the standard procedures or technical requirements of the ENERGY STAR® New Construction programs.
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IAQ Benefits of Upgrading HVAC Systems
Investing in energy-efficient HVAC systems not only provides financial benefits through the § 45L tax credits but also significantly improves indoor air quality (IAQ). Upgrading to these systems ensures better ventilation, reduces pollutants, and enhances comfort in residential and light commercial spaces. While builders can pass along the costs of these upgrades to homeowners, the availability of rebates helps offset these expenses, making it a financially sound decision. Homeowners who prioritize IAQ can enjoy healthier living environments while also benefiting from the long-term energy savings that come with efficient HVAC systems.
Fantech’s Comprehensive Product Offerings
To support these efforts, Fantech offers a comprehensive range of solutions designed to optimize ventilation and improve indoor air quality. Our product lineup includes inline fans, radon mitigation fans, bath fans, and fresh air systems with heat recovery (HRVs) and energy recovery (ERVs). Each solution is engineered to enhance energy efficiency and IAQ, providing builders and contractors with the tools needed to meet ENERGY STAR® certification standards. By integrating Fantech’s products, builders can ensure homes are not only compliant with the latest regulations but also promote a healthier living environment for residents.
The updated § 45L Tax Credits offer substantial financial incentives for building energy-efficient homes, presenting an excellent opportunity for builders, contractors, and engineers to enhance HVAC systems. Achieving ENERGY STAR® certification enables builders to access these credits while advancing sustainable, energy-efficient construction practices.
A valuable resource for homeowners in the U.S. is the Database of State Incentives for Renewables & Efficiency (DSIRE). Since its establishment in 1995, DSIRE has been the most comprehensive source for information on incentives and policies supporting renewable energy and energy efficiency. For more details about the § 45L credit, visit the IRS website.
Pass it on.
As a resource, Fantech products that are ENERGY STAR ® certified include:
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bathfan
Ceiling or wall, surface mount bathroom fans
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PB Series
Premium bathroom fans (most models)
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ATMO
Fresh air appliances with energy recovery (ERVs)
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FIT 120E-D-EC
Fresh air appliances with energy recover (ERVs)
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ATMO 200H
Fresh air appliance with heat recovery (HRV)
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HERO
Fresh air appliances with heat recover (HRVs)
Sources
U.S. Internal Revenue Service. (2023).
Federal Tax Credits for Builders of Energy Efficient Homes.
U.S. Environmental Protection Agency. (2023).
§ 45L Tax Credits for Home Builders. Retrieved from EPA website. § 45L Tax Credits for Home Builders | ENERGY STAR
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