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IRA Extends Energy Efficiency Building Incentives

Understanding what the changes mean

In August 2022, President Joe Biden signed the Inflation Reduction Act of 2022, H.R. 5376. The legislation includes components of the former Build Back Better Act and addresses energy, health and targeted tax policies aimed at fighting inflation, increasing domestic energy production, and reducing U.S. carbon emissions by 40 percent by the year 2030.

To meet the aggressive energy conservation and climate-focused goals laid out in the IRA, two existing energy efficiency tax incentives, 45L Energy Efficient Tax Credits and 179D Energy Efficient Commercial Buildings were either expanded or extended to motivate the U.S. construction industry to take advantage of significant tax credits and tax deductions offered for new building construction or for renovation of existing property.

Changes to 45L Energy Efficient Tax Credits
The 45L Energy Efficient Home Credit, which officially expired in at the end of 2021 before the IRA was signed into law (August 2022), provides single-family and multi-family homebuilders with a $2,000 per unit tax credit for meeting certain energy savings requirements. The IRA provisions extend the 45L tax credit for homes sold or leased during 2022 with few modifications to the existing provisions, so residences sold or leased in 2022 qualify for the 45L credit using the 2021 energy efficiency standards. However, from Jan. 1, 2023, through Dec. 31, 2032, the IRA significantly changes the 45L Energy Efficient Home Credit with new provisions and requirements.

Please select this link to read the complete article from OSAP Strategic Partner Clark Schaefer Hackett.


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