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Power Up Savings: Decoding the New § 45L Tax Credit Update
Reading time: 3 minutes
Comfort
In residential and light commercial construction, optimizing HVAC systems is crucial for achieving energy efficiency and superior indoor air quality. The updated § 45L Tax Credits, part of the Inflation Reduction Act (IRA), extend these benefits to builders of energy-efficient homes, making it even more critical to install a residential ERV/HRV system.
What’s New with § 45L Tax Credits?
The Section § 45L New Energy Efficient Home Credit has been updated and extended through 2032. For homes and apartments acquired on or after January 1, 2023, certification to an eligible version of the ENERGY STAR® program requirements is now mandatory to earn 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 larger tax credit is also available for homes certified to DOE's Zero Energy Ready Home (ZERH) Program. This incentive encourages builders to aim for higher energy efficiency standards.
Certification and Eligibility
To qualify for the § 45L tax credit, homes must meet specific ENERGY STAR® program requirements. Certification must adhere to the versions specified by the EPA’s effective dates and the transition timelines outlined 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
In support of the § 45L credit, the EPA has adopted new policies related to the effective dates of program requirements, deemed certifications for national and regional program requirements, and accepted documentation of ENERGY STAR® certification. These policies are specifically for the § 45L credit and do not alter the usual 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 wide range of solutions designed to optimize ventilation and indoor air quality. Our lineup includes inline fans, radon mitigation fans, bath fans, and fresh air appliances with heat recovery (HRVs) and energy recovery (ERVs). Each product is engineered to enhance energy efficiency and improve IAQ, providing builders and contractors with the tools they need to meet ENERGY STAR® certification standards. By incorporating Fantech’s solutions into their projects, builders can ensure that homes are not only compliant with the latest regulations but also provide a healthier environment for occupants.
The updated § 45L Tax Credits provide significant financial incentives for building energy-efficient homes, making it an excellent opportunity for builders, contractors, and engineers to optimize HVAC systems. By meeting ENERGY STAR® certification standards, builders can not only benefit from the tax credits but also contribute to sustainable and energy-efficient construction practices.
A great resource for homeowners in the States is the Database of State Incentives for Renewables & Efficiency (DSIRE). Established in 1995, DSIRE is the most comprehensive source of information on incentives and policies that support renewable energy and energy efficiency in the United States. For more detailed information about the § 45L credit, visit the IRS website.
Pass on the knowledge.
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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