Inflation Reduction Act Provisions for Building and Homes

BUILDINGS AND HOMES
TAX PROVISIONS Energy Efficiency Home Improvement Credit
DESCRIPTION Provides a tax credit for energy-efficiency improvements of residential homes.
ELIGIBLE RECIPIENTS Homeowners; renters for certain improvements
BASE CREDIT AMOUNT 30% of cost, with limits for each type of improvement and total per year. Credit capped at $600 for "energy property," e.g. efficient heating and cooling equipment; $600 for windows; $250 per door, $500 total for doors; $2,000 for heat pumps; $1,200 for qualified energy efficiency improvements to the building envelope, including insulation and air sealing. Total annual credit capped at $1,200, with a separate annual $2,000 limit for heat pumps. $150 credit for home energy audits.
BONUS CREDIT AMOUNT None
U.S. CODE 26 U.S. Code 25C
IRA SECTION 13301
FUNDING MECHANISM Consumer tax credit
NEW OR MODIFIED? Modified and extended. Credit rate increased from 10% to 30%. Eligibility and standards are modified. $500/per taxpayer lifetime limit eliminated and replaced with increased annual limits.
PERIOD OF AVAILABILITY 2022-2032
DIRECT PAY No
TRANSFERABLE No
STACKABLE No rules
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Energy Efficient Home Credit | (irs.gov)
Making Our Homes More Efficient: Clean Energy Tax Credits for Consumers | Department of Energy
Federal Income Tax Credits and Incentives for Energy Efficiency | ENERGY STAR

 

BUILDINGS AND HOMES
TAX PROVISIONS Residential Clean Energy Credit
DESCRIPTION Provides a tax credit for the purchase of residential clean energy equipment, including battery storage with capacity of at least 3 kWh.
ELIGIBLE RECIPIENTS Homeowners (including renters)
BASE CREDIT AMOUNT 30% of cost of equipment through 2032; 26% in 2033; 22% in 2034.
BONUS CREDIT AMOUNT None
U.S. CODE 26 U.S. Code 25D
IRA SECTION 13302
FUNDING MECHANISM Consumer tax credit
NEW OR MODIFIED? Modified and extended. Credit extended at 30% through 2032, with phasedown through 2034. Battery storage newly eligible in 2023; biomass fuel property credit eliminated.
PERIOD OF AVAILABILITY 2022-2032, with phasedown over 2033-2034.
DIRECT PAY No
TRANSFERABLE No
STACKABLE No rules
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Residential Energy Credits | (irs.gov)
Making Our Homes More Efficient: Clean Energy Tax Credits for Consumers | Department of Energy
Federal Income Tax Credits and Incentives for Energy Efficiency | ENERGY STAR

 

 

BUILDINGS AND HOMES
TAX PROVISIONS Energy Efficient Commercial Buildings Deduction
DESCRIPTION Provides a tax deduction for energy efficiency improvements to commercial buildings, such as improvements to interior lighting; heating, cooling, and ventilation, hot water; and building envelope.
ELIGIBLE RECIPIENTS Owners and long-term lessees of commercial buildings. Designers of energy efficient building property (architects, engineers). Tax-exempt owners of commercial properties, pending Treasury guidance on deduction allocation.
BASE CREDIT AMOUNT $0.50-$1 per square foot, depending on increase in efficiency, with deduction over four year periods capped at $1 per square foot. Inflation adjusted. Alternatively, taxpayers can deduct adjusted basis in "qualified retrofit plans" that reduce a building's energy use intensity by at least 25%.
BONUS CREDIT AMOUNT 5 times the base amount if the project meets prevailing wage and apprenticeship requirements.
U.S. CODE 26 U.S. Code 179D
IRA SECTION 13303
FUNDING MECHANISM Business tax deduction
NEW OR MODIFIED? Modified and extended. Efficiency requirements updated.
PERIOD OF AVAILABILITY Permanent; new rules generally begin in 2023.
DIRECT PAY No
TRANSFERABLE No
STACKABLE No rules
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)

 

 

BUILDINGS AND HOMES
TAX PROVISIONS New Energy Efficient Homes Credit
DESCRIPTION Provides a tax credit for construction of new energy efficient homes.
ELIGIBLE RECIPIENTS Homebuilders
BASE CREDIT AMOUNT $2,500 for new homes meeting Energy Star standards; $5,000 for certified zero-energy ready homes. For multifamily, base amounts are $500 per unit for Energy Star and $1000 per unit for zero-energy ready.
BONUS CREDIT AMOUNT For multifamily homes, 5 times the base amount if prevailing wage requirements are met.
U.S. CODE 26 U.S. Code 45L
IRA SECTION 13304
FUNDING MECHANISM Tax credit for homebuilders
NEW OR MODIFIED? Existing, but the credit had previously expired at end of 2021. Retroactively extended with new rules effective for homes acquired after 2022.
PERIOD OF AVAILABILITY 2023-2032
DIRECT PAY No
TRANSFERABLE No
STACKABLE Yes. Taxpayers claiming the Low-Income Housing Tax Credit do not have to reduce basis for 45L credits claimed.
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)