45 L Tax Credit for Single Family and Multifamily Development

The 45L tax credit is a federal incentive designed to encourage energy-efficient home construction. It offers builders and developers a tax credit of up to $5,000 per dwelling unit when constructing qualifying energy-efficient homes. This credit not only rewards builders but also contributes to a more sustainable future by promoting the adoption of energy-efficient practices.

What does the 45L Tax Credit entail for Single Family?

  • The 45L tax credit has been extended beyond a one-year renewal through 2032 in the state of Virginia.
  • The tax credit amounts have been increased for single-family homes, and there are additional changes specific to multi-family homes.
  • To qualify for the tax credit, single family homes must meet specific energy efficiency requirements including achieving 50% reduction in heating and cooling energy consumption compared to a reference dwelling unit that meets the minimum requirements of the 2006 International Energy Conservation Code (IECC).

What does the 45L Tax Credit entail for Multifamily?

  • The 45L tax credit has been extended beyond a one-year renewal through 2032 in the state of Virginia.
  • The ENERGY STAR multi-family program is currently available in Virginia through 2025, with updates planned for the future.
  • Multi-family buildings over five stories cannot currently meet ENERGY STAR standards, but the Department of Energy is developing a Zero Energy Ready Home (ZERH) program specifically for multi-family buildings.
  • The tax credit for multi-family dwelling units in Virginia includes $500 for ENERGY STAR certification, $1,000 per dwelling unit for ENERGY STAR multi-family new construction projects certified for the ZERH program, and $5,000 per dwelling unit for eligible projects that are both Energy Star certified and certified for the ZERH program, with prevailing wage demonstration.
  • Developers seeking funding through the Housing Innovation for Energy Efficiency (HIEE) program must demonstrate the ability to meet the DOE Zero Energy Ready Home standards, including addressing ventilation and dehumidification.
  • The HIEE program receives funds allocated through the Regional Greenhouse Gas Initiative (RGGI) auction and is administered by the Virginia Department of Housing and Community Development (DHCD).
  • The HIEE program supports energy efficiency for low and moderate-income housing, and funding allocation decisions are made through a stakeholder process involving developers and other participants.
  • The HIEE program aims to leverage the work of developers participating in energy efficiency initiatives and gradually increase energy efficiency in housing delivery.

Wondering about next steps? Join us for a free continuing education webinar including discussions around the 45L Tax Credit, HIEE, ZERHs, and more. If you’re ready to take the next steps within your multifamily project begin registration below!

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