Save Money & the Environment: New Tax Incentives For You & The Planet

Impressive federal tax incentives for commercial and residential construction are driving the AEC industry towards responsible construction of energy-efficient structures. With buildings accounting for over 40% of energy consumption and emissions, it's no surprise that the 2023 IRA Federal Legislation is targeting a straightforward approach to reducing energy consumption through the built environment. By choosing energy efficient Building Systems (R-Shield Insulation & Geofoam, Premier SIPS & Premier ICF) from Premier, not only do you get high-performing and healthier buildings, but you also open the door to these lucrative tax incentives.

Energy efficient construction has been a common practice for many experts in the field for decades, thanks to engineered insulation and structural products like R-Shield roof, wall, below grade Insulation and Geofoam, as well as Premier Structural Insulated Panel Systems (SIPS) and Premier Insulated Concrete Form (ICF) Building Envelopes used for innovative and efficient offsite construction. With the added bonus of lucrative tax incentives, sustainable building choices can leave a lasting legacy while also benefiting the project budget and energy resource consumption. And the best part? It's not new, expensive, or difficult to achieve. Note: The following is a guide only and should be verified by a tax professional.

The Key Types of Incentives Premier SIPS Help Your Projects Qualify For:

1. Residential: 45L Energy Efficiency Credit – Single Family business tax CREDIT available to the Builder/Building Owner (not acquiring homeowner)
2. Commercial: 179D Energy-Efficient Commercial Buildings tax DEDUCTION available to Commercial Building Owner, Leaseholder, or Eligible Building Designers
3. Multifamily: A combination of Residential AND Commercial Incentives for structures four stories and greater

Read on for details and a breakdown on each, and the efficiency opportunities you can achieve when building with Premier Building Systems Products. 

Residential 45L Federal Tax Credit Overview:

The Energy Efficient Home Credit update from the 2023 Inflation Reduction Act (IRA) offers the following projects updated tax credit options:

• Single Family Homes (custom, or spec tract homes)
• ADU or DADU (Additional Dwelling Unit or Detached Additional Dwelling Unit)
• Multifamily Apartments or Condominiums less than four stories (the height restriction for 45L has been removed for 
• Senior Housing, Assisted Living Facilities, Student Housing (see Multifamily section for details) 
  
  

The 45L Tax Credit Breakdown:

• What type of incentive is it? 45L is a business tax credit per dwelling unit, not a personal tax credit.
• Who is eligible? A single “eligible contractor” which could be a building owner, builder [with intent to sell/lease], etc. Eligibility is designated by ownership at time of construction.  [Note: it is not available to the acquiring homeowner, even in the case of home construction. See IRS instructions for specifics.
• How much is the credit? $500-$5000 per dwelling unit is available to the Builder/ Building owner. Credit amount is based on dwelling unit energy efficiency being either EnergyStar Certified* or a higher efficiency ZERH (Zero Energy Ready Home Program Standard). See table below to calculate credit for your project.
• What are the energy efficiency requirements? EnergyStar Certification and Zero Energy Ready Homes (ZERH) have clear criteria for the efficiency and systems required. Building to these standards and then documenting the energy efficiency qualification is commonly done through typical energy modeling and/or post construction blower door tests. View all of the ways to document an building’s energy efficiency and qualify for this CREDIT from the IRS by verifying efficiency compliance with a DOE approved 45L software.
• NOTE: Affordable housing projects may now have opportunities to claim both the residential 45L & Low-Income Housing Tax Credit (LIHTC).
  
  

Commercial 179D Federal Tax Deduction Overview

The Energy-Efficient Commercial Buildings Tax Deduction (Consolidated Appropriation Act [CAA] and Inflation Reduction Act [IRA]) offers new construction commercial building projects of all types and sizes with new significant advantages to design and construct with energy efficiency in mind.

The 179D Commercial Tax Deduction Breakdown:

• What are the energy efficiency requirements? Projects which exceed the ASHRAE 90.1 standard (“Energy Standard for Buildings Except Low Rise Residential Buildings”) in effect four (4) years prior to service date by a minimum 25%, up to 50%, energy improvement.
• How much are the tax deductions? $.50-$5.00/sf. The amount per square foot is based on whether or not Prevailing Wage & Apprenticeship Requirements are met Under Section 45(b)(6)(B)(ii). See table below to calculate.
  
• Who is Eligible? Commercial Building Owners & Leaseholders, Owners of residential buildings with more than four stories, Or Eligible designers [architects, engineers, contractors, environmental consultants, or energy service providers] for energy-efficient systems eligible for the 179D deduction, as allocated by the building owner. See IRS Notice 2008-40 for specifics.
• Can this deduction be taken for multiple years? Additional improvements & deduction can be claimed every 3 or 4 years.* Commercial buildings can claim 179D every 3 years for commercial or every 4 years for government, tribal government, non-profits. Through December 31^st, 2032! The deduction claimed is based on the same table and percentage of energy efficiency improvement over the ASHRAE 90.1 standard from 4 years prior.

Multifamily Federal Tax Incentive Overview

The combination of these two credits and deduction for multifamily projects is simply enormous. The Builder/Owner can take the residential business per unit tax credit (45L)  AND the commercial per sq foot incentive for the owner, leaseholder, or eligible designers. This package truly is designed to help meet the needs of a massive housing shortage (and affordability crisis) as well as improve energy efficiency in our buildings… and lower energy costs further contributes to lower housing costs for renters/occupants. This truly is a win for so many seeking to build and live in more affordable, environmentally responsible spaces, with significant extra tax perks along the way.

The Breakdown for Multifamily Projects:

• There are now opportunities to combine 179D and 45L for qualifying projects. This is become beginning in 2023 the 45L program removed a three-story or less height restriction. It’s now open to any size development, including residential rental units with structures that are four stories or greater.
• Additionally, affordable housing units may have the opportunity to combine Low Income Housing Tax Credit (LIHTC).
  
  

Don’t stop at Federal Incentives.

The federal incentives for new construction are available to the entire country, but the incentives don’t stop there. Each State, and many County, City, and Utility Districts offer additional energy saving rebates and incentives for choosing energy efficient thermal envelopes like those created with Premier SIPS. A little legwork can earn your project thousands of rebates and incentives. Check with your regional districts or search yourself for energy incentives at the Database of State Incentives for Renewables and Efficiency or by searching for “New Construction Energy Efficiency Rebates” in your favorite web browser. And always remember to consult a tax professional to verify details for your specific projects.

When you design and build with Premier's family of Building Systems you are choosing the easiest and most efficient path to new energy efficiency tax credits and tax deductions. Be sure to take advantage of designing and building your projects with a superior Premier Building Systems.  

As always, local Premier Representatives are ready and available to help you switch to SIPS and take advantage of these generous energy efficiency tax incentives, while delivering a superior structure that you can be proud of. 

Learn more about the driving forces behind the new Tax Incentives:

• The Inflation Reduction Act & Its Effects On Sustainable Housing from the Energy Efficiency Building Alliance (EEBA)
• What does the IRA mean for you? From Energy.gov
• IRS details and updates on the Inflation Reduction Act
• The EPA lists additional Green Power Partners – businesses, nonprofits, educational institutions, and state, local, and tribal organizations who can take advantage of the IRA