After the passage of the One Big Beautiful Bill Act there were several modifications to energy incentives, including 179D and 45L.
45L, which was originally set to sunset at the end of 2032, has been moved up and the credit will now only be available to units/homes leased or sold, that are certified under Energy Star or Zero Energy Ready Home (ZERH), until June 30, 2026. There are no other changes to rules or requirements.
Presently and until the 2026 termination for 45L:
Homes need to be certified under the Energy Star or ZERH for units/homes leased or sold January 1, 2023 or later. Prevailing Wage requirements (for multifamily) need to be followed for the higher deduction amounts.
| 45L | Energy Star | ZERH |
|---|---|---|
| Single Family Homes | $2,500 | $5,000 |
| Manufactured Homes | $2,500 | $5,000 |
| Multifamily (prevailing wage not met) | $500 | $1,000 |
| Multifamily (prevailing wage met) | $2,500 | $5,000 |
179D, which was made permanent in the Consolidated Appropriations Act of 2021, will now no longer be available for buildings that begin construction after June 30, 2026. There are no other changes to the rules or requirements.
Presently and for all the buildings that begin construction before July 1, 2026 for 179D:
The deduction is available to both commercial building owners as well as available to be allocated to the designers of buildings owned by tax exempt entities. It will also still be available to any taxpayers looking back at prior years where the value of 179D may have been overlooked. Prevailing wage and apprenticeship (PW/A) rules have to be met for the 5 times bonus.
Pre-IRA (until end of 2022):
| Partial Deduction* | |||
|---|---|---|---|
| Deduction/Sqft | $0.60 | $0.61 | $0.63 |
| Tax year | Before 2021 | 2021 | 2022 |
| HVAC/HW | 15% | ||
| Lighting | 25% | ||
| Envelope | 10% | ||
| Full Deduction* | |||
|---|---|---|---|
| Deduction/Sqft | $1.80 | $1.82 | $1.88 |
| Tax Year | Before 2021 | 2021 | 2022 |
| HVAC/HW | 50% | ||
| Lighting | |||
| Envelope | |||
*Inflation adjustments shown per year
Post-IRA Benefits (2023 and for buildings starting construction prior to July 1, 2026):
| Energy Reduction (ER) | Deduction Amount January 1, 2023* | Deduction Amount January 1, 2024* | Deduction Amount January 1, 2025* | PW/A Not Met | PW/A Met** | Increase Per Additional ER |
|---|---|---|---|---|---|---|
| 25% | $0.54 | $0.57 | $0.58 | X | $.02 up to | |
| 50% | $1.07 | $1.13 | $1.16 | X | ||
| 25% | $2.68 | $2.83 | $2.83 | X | $.10/.12 up to | |
| 50% | $5.36 | $5.65 | $5.81 | X |
*Inflation adjustments shown per year and based on when placed into service
**There is an exception for buildings that begin construction prior to January 29, 2023, which allows for the higher tier deduction claim without meeting the PWA requirements