IRS Tax TipsSeptember 20, 2023

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Issue Number: Tax Tip 2023-113

Builders of new energy efficient homes may qualify for an expanded tax credit

Eligible contractors who build or substantially reconstruct qualified new energy efficient homes may be eligible for a tax credit up to $5,000 per home. The actual amount of the credit depends on eligibility requirements such as the type of home, the home’s energy efficiency and the date when someone buys or leases the home.

Contractors must meet eligibility requirements:

  • Construct or substantially reconstruct a qualified home.
  • Own the home and have a basis in it during construction.
  • Sell or rent it to a person for use as a residence.

To qualify, a home must be:

  • A single-family (including manufactured homes) or multifamily home, as defined under certain Energy Star program requirements.
  • Located in the United States.
  • Purchased or rented for use as a residence.
  • Certified to meet applicable energy saving requirements based on home type and acquisition date.

Requirements and credit amounts for 2023 and after:
For homes acquired in 2023 through 2032, the credit amount ranges from $500 to $5,000, depending on the standards met, which include:

  • Energy Star program requirements.
  • Zero energy ready home program requirements.
  • Prevailing wage requirements.

Requirements and credit amounts before 2023:
For homes acquired before 2023, the credit amount is $1,000 if the 30% standard is met or $2,000 if the 50% standard is met. The standards include:

  • For the 50% standard, certifying that the home has an annual level of heating and cooling energy consumption that is at least 50% less energy than a comparable home and gets at least 1/5 of its energy savings from building envelope improvements.
  • For the 30% standard, certifying that the home has an annual level of hearing and cooling energy consumption that is at least 30% less energy than a comparable home.
  • Meeting certain federal manufactured home rules.
  • Meeting certain Energy Star requirements.

Properly claiming the credit:
Eligible contractors must meet all requirements before claiming the credit. Eligible contractors should review the Instructions for Form 8908, Energy Efficient Home Credit, for full details about these requirements. They must complete Form 8908, Energy Efficient Home Credit, and submit it with their tax return to claim the credit. 

More information:
Credit for Builders of Energy-Efficient Homes

Instructions for Form 8908
Credits and Deductions Under the Inflation Reduction Act of 2022


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