Energy-Efficient New Homes Tax Credit for Home Builders

Summary

Note: Section 13304 of The Inflation Reduction Act of 2022 (H.R. 5376) modified this tax credit and extended the expiration date credit from December 31, 2021 to December 31, 2032. The changes to the credit take effect January 1, 2023. The summary below describes the credit before and after H.R. 5376. 

Tax Credit for homes constructed and acquired before January 1, 2023:

The federal Energy Policy Act of 2005 established tax credits of up to $2,000 for builders of all new energy-efficient homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards. Initially scheduled to expire at the end of 2007, the tax credit was extended several times

The home qualifies for the credit if:

• It is located in the United States;
• Its construction is substantially completed before December 31, 2021;
• It meets the energy saving requirements outlined in the statute; and
• It is acquired from the eligible contractor after December 31, 2013, and before January 1, 2022, for use as a residence.

Energy Saving Requirements
Site-built homes qualify for a $2,000 credit if they are certified to reduce heating and cooling energy consumption by 50% relative to the International Energy Conservation Code (IECC) 2006 and meet minimum efficiency standards established by the Department of Energy. Building envelope component improvements must account for at least one-fifth of the reduction in energy consumption.

Manufactured homes qualify for a $2,000 credit if they conform to Federal Manufactured Home Construction and Safety Standards and meet the energy savings requirements of site-built homes described above. Manufactured homes qualify for a $1,000 credit if they conform to Federal Manufactured Home Construction and Safety Standards and reduce energy consumption by 30% relative to IECC 2006. In this case, building envelope component improvements must account for at least one-third of the reduction in energy consumption. Alternatively, manufactured homes can also qualify for a $1,000 credit if they meet ENERGY STAR Labeled Home requirements.

Certification
The Internal Revenue Service (IRS) has issued guidance to provide information about the certification process that a builder must complete to qualify for the credit. The guidance also provides for a public list of software programs that may be used in calculating energy consumption for purposes of obtaining a certification.

IRS Notice 2006-27 provides guidance for the credit for building energy-efficient homes other than manufactured homes. IRS Notice 2006-28 provides guidance for the credit for building energy-efficient manufactured homes. Click here to access IRS Form 8908: Energy Efficient Home Credit.

Tax Credit for homes constructed and acquired after December 31, 2022 and before January 1, 2033:

The Inflation Reduction Act of 2022 established new eligibility criteria for this tax credit, different tax credit values, and opportunities for bonus credits for multifamily units. The IRS issued a new guidance document, IRS Notice 2023-65, in September 2023. The new guidance addresses the person that is eligible for the credit, how to determine the applicable amount of the credit, energy saving requirements, certification requirements, and substantiation requirements. 

Single-family homes and manufactured homes that meet the applicable Energy Star requirements can receive a tax credit of $2,500. Single-family homes acquired before January 1, 2025 must meet the Energy Star Single-Family New Homes National Program Requirements 3.1, and homes acquired after December 31, 2024 must meet the Energy Star Single-Family New Homes National Program Requirements 3.2. Manufactured homes must meet the most recent Energy Star Manufactured Home National program requirements as in effect on the latter of January 1, 2023 or January 1 of two calendar years prior to the date the home is acquired.  

Single Family homes and manufactured that are certified as a zero energy ready home under the Zero Energy Ready Home Program of the U.S. Department of Energy can receive a tax credit of $5,000. 

Multifamily homes that meet the applicable Energy Star Multifamily New Construction Program requirements can receive a tax credit of $500 per unit. Multifamily homes that meet the applicable Energy Star Multifamily New Construction Program requirements and pay prevailing wages to the laborers and mechanics employed to construct the building can receive a higher tax credit of $2,500 per unit.

Multifamily homes that are certified as a zero energy ready home under the Zero Energy Ready Home Program of the U.S. Department of Energy can receive a tax credit of $1,000 per unit. Multifamily homes that are certified as a zero energy ready home under the Zero Energy Ready Home Program of the U.S. Department of Energy and pay prevailing wages to the laborers and mechanics employed to construct the building can receive a higher tax credit of $5,000 per unit.