It would be crazy for us, as U.S. Citizens, to expect our members of Congress to actually do work on an election year. Right? It must be right, because it took them until December to finally pass the Tax Credit Extenders, to where many of them had to go retroactive. I wish I had the power, in my work, to do nothing for long periods of time and then just make everything retroactive. I have a feeling I wouldn’t be in business very long. Anyway, I could sit here and debate the dis-functionality of Congress all day, but that would just be a waste of time.
The real reason for this article is to give details on the extension of the New Home Tax Credit for Builders, also know as, the 2005 EPAct Tax Credit, AKA, 45L Tax Credit for Energy Efficient Homes. This credit is for $2,000 per qualified and completed home within the time period. The good news is that it got extended to December 31, 2016 and goes retroactive back to January 1, 2015.
Any homes that were completed in 2015 can get the credit, if they qualify. Our industry is lobbying hard to get this extended for a longer period of time. This credit was designed to incentivize builders to build an energy efficient home, which is great. The problem is, Congress doesn’t understand the building process. The design process usually starts at least 6 months before breaking ground. That means making adjustments to the design to help get the home to qualify need to be made, at a minimum, a year prior to the home being completed. How can we expect the majority of builders to invest in this program when it gets extended on a year by year basis and there is no guarantee that its going to continue to get extended?
We need to continue to improve how homes are being built here in the United States. The 45L Tax Credit is a great program to promote this, but if it continues to get managed the way it is now, we are not going to get the number of builders behind it that we need. Congress needs to wake up, do their job and manage these programs like competent individuals. Luckily we have some really good builders here in West Michigan that are committed to building energy efficient homes and the Tax Credit is just a bonus.
How does a home qualify?
First, this is a business credit, which means a homeowner cannot qualify. The builder has to have some kind of ownership in the project during the construction. Whether they own the lot or the home or both during the construction. The home has to meet the “50% energy efficient standard”. This means the home must have a projected annual energy level of heating and cooling energy consumption at least 50% below the annual level of a comparable home and has building envelope component improvements that account for at least 1/5th of the 50% reduction in energy consumption. For example, a qualifying component of the building envelope could be insulation or windows, but has to account for 1/5th of the 50% reduction. This probably seems confusing, which is why you need to have a 3rd party Rater to verify that the home qualifies. Once the Rater qualifies the home, paperwork is given to the builder to have on file. At tax time, all the builder has to do is fill out the 1 page IRS form 8908 (really easy) and file that with your business tax return.
GreenEdge of Michigan is a certified Rater and is able to qualify a home for the Tax Credit. Call us at 616-419-8558.
*****GreenEdge of Michigan can ONLY qualify a home for this tax credit. We CANNOT determine if a builder or individual is eligible. We highly recommend seeking advice and approval from your licensed tax professional prior to making any decision about this credit. This article is not intended to be tax advice.*****