The Inflation Reduction Act of 2022 (IRA) amended Internal Revenue Code Section 45L to provide eligible contractors with a tax credit for eligible new or substantially reconstructed homes that meet applicable ENERGY STAR home program or DOE Zero Energy Ready Home (ZERH) program requirements.

The new Section 45L provisions include two tiers of credits, with the higher credits for eligible homes and dwelling units certified to applicable ZERH program requirements. The 45L tax credit is $5,000 for single family and manufactured homes eligible to participate in the EPA’s ENERGY STAR Single Family New Homes Program or the ENERGY STAR Manufactured New Homes Program, respectively, and which are certified to applicable ZERH program requirements. The 45L tax credit is $1,000 for dwelling units that are part of a building eligible to participate in the EPA’s ENERGY STAR Multifamily New Construction Program, and which are certified to applicable ZERH program requirements, unless the project meets prevailing wage requirements, in which case the 45L tax credit is $5,000 per dwelling unit. The amended 45L tax credit applies to qualified energy efficient homes acquired after December 31, 2022, and before January 1, 2033, for use as a residence during the taxable year.