Inflation Reduction Act Tax Credit Incentives for Contractors

On August 16, 2022, President Biden signed the Inflation Reduction Act. Both existing and expired energy efficiency tax incentives including 179D Deductions and 45L Credits have been expanded significantly.

AAFCPAs would like to make Real Estate and Construction clients aware of the following provisions:

Section 179D Tax Deduction

The Inflation Reduction Act aims to invest in clean energy and increases the value of the section 179D tax deduction for contractors who design and build energy-efficient buildings.

Under the previous section 179D, eligible contractors could receive a deduction of up to $1.88 per square foot when designing and building government owned buildings. Government building owners, as non-tax paying entities, could choose to pass this credit on to their builders.

The Inflation Reduction Act increases that amount to $5.00 per square foot and expands on the eligible customers to include nonprofit organizations, schools & universities, churches, and other public entities.

45L Energy Efficient Home Tax Credit

The Inflation Reduction Act also expands upon section 45L of the Internal Revenue Code, where eligible builders of energy efficient homes and apartment buildings could receive a tax credit up to $2,000 per dwelling unit, now up to $5,000 per dwelling unit.

This limited recap focuses only on these two tax provisions within the bill. If you have questions, please contact Stephen Lanza, CPA, MSA at 774.512.4171, slanza@nullaafcpa.com; Dan Stanhope, MSA, CCIFP, CPA, at 774.512.4134, dstanhope@nullaafcpa.com; or your AAFCPAs Partner.