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SECTION 45L TAX CREDITS:

The Most Overlooked Tax Credit for Residential Developers Guest Contributor: Brandon Val Verde, Senior Manager Green Building Tax Incentives, KBKG

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he §45L credit is a federal tax incentive for developers of apartments, condos, or spec homes that meet certain energy efficiency standards. Eligible construction also includes substantial rehabilitation. Section 45L tax credits incentivize real estate developers and investors by allowing a $2,000 business tax credit for each qualifying home they’ve built within the last 4‐5 years. Homes that are leased or sold and part of single‐family or multi‐family developments may qualify. To be eligible for these tax credits, the home must have been built in the United States and must be located within a building that is 3 stories or less above grade in height. The eligible home must also be properly simulated to show a reduction in heating and cooling energy consumption of 50% compared to the 2006 International Energy Conservation Code (IECC). Of this 50% reduction, a minimum of 10% must come from the building envelope. The building envelope plays an important role as it is made up the construction elements (e.g. walls, floor, roof, windows, etc.) that separate the inside of a home from the outside. Although

Case Study: 60-unit multifamily project in Southern California As required by Title 24 code, the walls, floors, and roofs of each home in the development were well insulated; the windows had high-performance values, and the HVAC systems had high-efficiency ratings. All 60 homes qualified for the $2,000 tax credit resulting in significant tax credits totaling $120,000 for the developer.

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KROST QUARTERLY VOL. 2 ISSUE 1 - THE REAL ESTATE ISSUE

Profile for KROST

KROST Quarterly Magazine: The Real Estate Issue - Volume 2, Issue 1  

KROST Quarterly is a digital publication released by KROST CPAs & Consultants headquartered in Pasadena, California. This issue of KROST Qua...

KROST Quarterly Magazine: The Real Estate Issue - Volume 2, Issue 1  

KROST Quarterly is a digital publication released by KROST CPAs & Consultants headquartered in Pasadena, California. This issue of KROST Qua...

Profile for krostcpas