The 45L Tax Credit is a little-known tax little-known provides a significant source of capital for buildings, both for owner-occupied and rental units. It applies to residential housing, including apartments, condominiums single-family homes, student units or townhouses and it translates in up to $2000 in tax credit per unit, aiming to help increase the construction and engineering of energy efficient buildings.
45L tax credit and Businesses
Buildings are measured against the 2006 International Energy Conservation Code standards. If you plan to have your building evaluated for the tax credit, you should know that it must meet a higher level of energy efficiency than the 2006 IECC baseline. As this applies to most buildings that have been built or rehabbed during the last four or more years, evaluation for the 45L tax credit is highly recommended.
The eligibility is determined after an onsite inspection and a computer modeling performed by trained, independent engineers that evaluate the project. If all this sounds complicated, note that the energy efficiency level is enhanced by small upgrades like higher value R insulation and roofing, adequate doors, and windows, or new HVAC units.
It is also important to know that not every energy efficient change is feasible and ought to be implemented. Some features may cost more than the tax credit benefits. Getting advice from expert engineers is imperative if you plan on maximizing the net gain from the 45L tax credit.
If you are seeking out the 45L Tax Credit, here are the requirements:
45L Tax Credit Eligibility Criteria:
- The building cannot be more than three stories tall;
- The building must be located in the US;
- The building must be sold or leased during the year the credit is applied for;
- The property must include energy efficient features;
Lower Tax Bill for your Business
The immediate benefit of the 45L tax credit is a lower tax bill. The $2000 tax credit can be split over a specific timeframe and used for tax reduction purposes. If this is what you have in mind, you can discuss the details with qualified professionals that can provide a detailed rundown on how the tax credit can help you with business expenses.
More Business Capital
The 45L tax credit can reduce the architectural and engineering costs of the building. The savings can be reinvested to upgrade further and develop the existing project, to enlarge the residential size of the unit or to implement a different project that will increase business profitability.
If you plan on building a large property, this extra capital can be of much help. For example, a 100-unit development can benefit from up to $200,000 in tax credits. Using this capital to increase the size of the project will also increase the long-term revenue of your business, without lowering the current cash flow.
Increased Property Values
Probably the biggest benefit of the 45L tax credit is that it increases residential property values. The certification process acknowledges that the building exceeds energy efficiency standards, and this is a worthy starting point for negotiations.
Energy efficient homes command a premium price, be it on the rental or the sales market. It is known that people want to save money on the long-term aim to get involved in activities that help preserve the environment. Opting for an energy efficient home is the surest route to achieving both these objectives.
Want to Get the 45L Tax Credit? Get Expert Help First
If you are committed to obtaining the 45L tax credit, it’s important to hire expert help as early as possible, when you settle upon the project plan. Businesses need expert consultancy both engineering and for the accounting side. Walker Reid Strategies has both areas well covered with industry specialists that are committed to helping you maximize your financial benefits. Contact us for further details and we’ll assist you during this entire process.