President Obama has signed into law a $622 billion tax package that permanently renews certain housing tax priorities while providing a two-year retroactive renewal for others through the end of tax year 2016.
The tax extenders package includes two key housing provisions:
- Credit for Energy-Efficient New Homes (45L). This provides builders a $2,000 tax credit for exceeding energy standards by 50%. The base energy code is the 2006 International Energy Conservation Code plus supplements. The 45L tax credit is extended through 2016 and can be claimed by both for-sale and for-rent homes of three stories or less, providing the developer has a tax basis in the property at the time of development. Section 45L is expected to save home builders $361 million for tax year 2015.
- Residential Energy Efficiency Tax Credit (25D). Extends through 2021 Section 25D, which provides tax incentives for installing clean energy technologies such as solar or geothermal. 25D provides a 30% tax credit to consumers for installing qualified power production property. The credit is also uncapped, so all qualifying expenses may be claimed. The bill will extend but phase out the credit for solar starting in 2020, when the credit will fall to 26%, dropping to 22% in 2021, before expiring in 2022.