How Does the 45L Tax Credit Work? Amounts, Eligibility, and Filing

The 45L tax credit pays home builders between $500 and $5,000 per energy-efficient dwelling unit they construct and then sell or lease as a residence, with the exact amount set by whether the unit is single-family or multi-family, which energy program it meets, and — for multi-family projects — whether prevailing wage was paid during construction. The Inflation Reduction Act of 2022 extended the credit through 2032 and built the current tiered structure.¹ The One Big Beautiful Bill, signed on July 4, 2025, modified Section 45L along with several other energy provisions, and the IRS has said further guidance will follow.² The rules below reflect the IRA-era version of the credit, which still governs prior-year returns, unused credits carried forward, and amended returns for eligible homes already placed in service. If you are planning new projects for 2026 and beyond, confirm current availability before relying on the credit.

How Much the Credit Pays Per Unit

The credit is calculated per dwelling unit. Each unit in a multi-family building counts on its own, so a 200-unit apartment project can generate 200 individual credits.

Single-Family and Manufactured Homes

Homes meeting the Energy Star Residential New Construction program (or Energy Star Manufactured New Homes, for manufactured units) qualify for $2,500 per dwelling unit. Homes meeting the Department of Energy’s Zero Energy Ready Home (ZERH) program qualify for $5,000 per unit.³ Prevailing wage does not affect these amounts; the tiers are fixed regardless of labor standards.

Multi-Family Homes

Multi-family units have a base amount and a higher amount tied to prevailing wage compliance:

Energy Star certified without prevailing wage: $500 per unit.³
Energy Star certified with prevailing wage: $2,500 per unit.
ZERH certified without prevailing wage: $1,000 per unit.
ZERH certified with prevailing wage: $5,000 per unit.

On a 100-unit building, the spread between the lowest and highest tier is $450,000 in total credits. That is where prevailing wage compliance makes or breaks a multi-family project’s economics.

Prevailing Wage on Multi-Family Projects

To reach the higher multi-family tiers, all laborers and mechanics working on the project must be paid at or above the prevailing rates set by the Department of Labor under the Davis-Bacon Act for the type of work and geographic area involved.⁴ Prevailing wage means the basic hourly rate plus any fringe benefits listed in the applicable wage determination. Cash wages alone or a mix of cash and employer-provided benefits will satisfy the rule.

The apprenticeship requirements that apply to many other IRA credits do not apply to Section 45L. Only the prevailing wage standard matters here.⁴ The rule reaches contractors and subcontractors at every tier, so you need a way to verify compliance across the full labor chain before claiming the higher amounts.

Who Can Claim the Credit

Only the “eligible contractor” can claim the 45L credit for a given unit. The statute defines this as the person who constructed the home, or for manufactured homes, the producer.⁵ In practice that is the person or entity that owned the property and held a basis in it during construction. If you hire a third-party general contractor to build on your behalf, you are still the eligible contractor because you held the ownership interest and financial risk, not the company you hired.⁶ Joint ventures and development partnerships need to sort this out early: when multiple parties share a project, only the one with the primary ownership interest during construction qualifies.

The credit is triggered when someone else acquires the unit for use as a residence during the tax year. “Acquired” covers both a sale and a lease.⁷ A home you keep for personal use does not qualify, and the unit has to actually serve as someone’s residence. Short-term commercial rentals and temporary lodging do not count.⁵

What Homes Qualify

The home must be in the United States and its construction must be substantially complete.⁵ Eligible dwelling types are single-family homes, multi-family apartment buildings, condominiums, and manufactured homes. Substantial reconstruction and rehabilitation count as “construction” under the statute, so developers revitalizing older buildings can qualify if the work significantly improves energy performance.

The IRA also removed the pre-2023 three-story height cap on multi-family projects, opening the credit to high-rise residential buildings that meet the current Energy Star Multifamily New Construction requirements.¹

Third-Party Certification

Every unit must be certified by an independent third party before you can claim the credit. The specific program depends on the dwelling type: single-family homes use the Energy Star Residential New Construction program (or ZERH for the higher tier); manufactured homes use the Energy Star Manufactured New Homes program (or ZERH); multi-family buildings use the Energy Star Multifamily New Construction national and regional program requirements, with the applicable version determined by the later of January 1, 2023, or January 1 of three calendar years before the acquisition date.⁵

Certification for site-built homes involves a third-party energy rating company that performs design review, at least two on-site inspections, and file submission to a recognized certification organization.⁶ Budget roughly $700 to $1,500 per unit for this work, depending on property type and local market. One version-year detail catches builders off guard: the minimum eligible program version is set by the home’s acquisition date, but the permit date controls which version of the Energy Star requirements the rater actually applies. Those can diverge when a home is built under one set of standards and sold months later under updated standards.

How to File the Credit

Claim the credit on IRS Form 8908, Energy Efficient Home Credit, entering the number of qualifying units in each efficiency category.⁸ The form multiplies the unit counts by the applicable per-unit amounts. Only units sold or leased during the tax year count for that year’s return; acquisition date controls.

The total from Form 8908 feeds into Form 3800, General Business Credit, which aggregates all your business credits and applies the tax liability limitation.⁹ The allowed credit then flows from Form 3800 to your income tax return.¹⁰

Do not attach the third-party certification report to your return. Keep the original in your permanent records; it is the primary evidence the IRS will ask for on audit. The general rule is to keep supporting records for at least three years after filing, and longer when carryforwards are involved.¹¹

Carryforward and Carryback

Because 45L is part of the general business credit, it is limited to your current-year tax liability. Any unused portion carries back one year and forward up to 20 years, applied to the earliest available year first.¹² Credits earned in low-liability years remain usable for up to two decades, and unused credits from prior eligible years stay fully valid even if the credit is no longer available for new construction.

Retroactive Claims

If you built qualifying homes in prior years but never claimed the credit, you can file amended returns. The general statute of limitations for a refund claim is three years from the original filing date or two years from the date the tax was paid, whichever is later.¹¹ Retroactive energy certification is often available, since a rater can evaluate the as-built home against the program version in effect for the year the unit was sold or leased. This is a commonly missed opportunity for builders who constructed Energy Star-level homes without realizing they qualified.

Stacking with the Low-Income Housing Tax Credit

Affordable housing developers using the Low-Income Housing Tax Credit under Section 42 can claim the 45L credit without reducing their LIHTC eligible basis. The IRA included this provision specifically to encourage energy-efficient construction in affordable housing that might otherwise have avoided 45L to protect a LIHTC allocation. The two credits stack with no trade-off.

1
U.S. Department of the Treasury. U.S. Department of the Treasury, IRS Release Guidance to Lower Americans Utility Bills, Increase Energy Efficiency of Homes
2
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under the One Big Beautiful Bill
3
ENERGY STAR. Section 45L Tax Credit for Home Builders
4
Internal Revenue Service. Frequently Asked Questions About the Prevailing Wage and Apprenticeship Under the Inflation Reduction Act
5
Office of the Law Revision Counsel. 26 USC 45L – New Energy Efficient Home Credit
6
ENERGY STAR. Section 45L Tax Credit Frequently Asked Questions
7
U.S. Department of Energy. Section 45L Tax Credits for DOE Efficient New Homes
8
Internal Revenue Service. About Form 8908, Energy Efficient Home Credit
9
Internal Revenue Service. Instructions for Form 3800 and Schedule A
10
Internal Revenue Service. Form 3800 General Business Credit
11
Internal Revenue Service. How Long Should I Keep Records
12
Office of the Law Revision Counsel. 26 USC 39 – Carryback and Carryforward of Unused Credits