The use of the new tax credit 45L has seen a surge, as the world wakes up to the needs of the environment. People have also began to realize the benefits of green construction and green homes. Just how do you get your hands on the $2,000 Tax Credit under section 45L? This is a commonly asked question by developers and home owners.
Calculation by Software
The rate of tax credit that a developer gets for their green construction is determined using software. The calculation by the software is based on taking a number of factors regarding the home and its energy quotient into account. To be considered a viable candidate to enjoy a tax credit under section 45L, the home needs to have a 50% less consumption of energy for heating and cooling than its counterparts with similar designs.
In addition to the factors considered by the software, there are other requirements that need to be fulfilled for a building to qualify and claim the 45L tax credits. These requirements are considerably detailed. They are:
- That the building needs to be in the United States
- The owner and/or developer, whoever is claiming the tax credit, needs to be a US taxpayer
- The construction of the building should have happened during or after the year 2006 (this is because the section 45L was first made part of the IRS tax code back in that year)
One of the reasons the calculation of the 45L tax credit is determined by the use of software is largely due to the complexity. The key factors that dictate the working of the software are:
- Duct systems
- Insulation R-Factors
- Window U-Factors
- Climate Zone
- Heating System efficiency
- SEER rating of AC system
All of these factors mentioned above barring one can be modified by the home owners or developers. The factor that cannot be changed is climate zone. Hence, developers that are looking to enjoy tax credits need to make sure they work on the factors outlined above which dictate the working of the software and whether or not the section 45L applies or not.