The Internal Revenue Service (IRS) has released new guidance on the new energy efficient home credit as amended by the Inflation Reduction Act (IRA), which extended and enhanced the energy efficient home credit in Section 45L of the Tax Code. 

The amended provision allows eligible contractors who construct or substantially reconstruct and rehabilitate qualified new energy efficient homes a tax credit of up to $5,000 per home. The actual amount of the credit depends on eligibility requirements such as the type of home, the home's energy efficiency, and with respect to multifamily dwelling units, whether prevailing wage requirements are met.

For homes acquired in 2023 through 2032, the credit amount ranges from $500 to $5,000, depending on the certification achieved and standards met, which include: Energy Star program requirements; Zero Energy Ready Home program requirements; and prevailing wage requirements (for multifamily dwelling units only).

For homes acquired before 2023, the credit amount is $1,000 or $2,000, depending on the standards met, which include: certifying that the home has an annual level of heating and cooling energy consumption that is at least 50 percent (or 30 percent for certain manufactured homes) less than that of a comparable home that meets certain energy standards, with building envelope component improvements accounting for at least 1/5 (or 1/3 for certain manufactured homes) of the reduction; and meeting certain federal manufactured home rules.

President Biden's Investing in America agenda is focused on reducing costs for Americans, and the Inflation Reduction Act is lowering utility bills by providing increased incentives to make homes more energy efficient," Deputy Secretary of the Treasury Wally Adeyemo said in a statement reported by Accounting Today. "Treasury's guidance provides clarity and certainty to home builders planning construction projects."