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.comDan Stanhope, MSA, CCIFP, CPA, at 774.512.4134,; or your AAFCPAs Partner.


About the Authors

Steve provides proactive tax and business advisory services to private, closely-held businesses in a variety of industries, including: construction, manufacturing & distribution, and retail. He specializes in providing federal and state tax planning & compliance for C Corps, S Corps, partnerships & their owners. He advises clients on year-end and multi-year tax planning, including: guidance related to changing tax code; monitoring and forecasting of income and operations in order to avoid year-end surprises; historical and current year activity to ensure accuracy and completeness of federal and state filings; opportunities to maximize federal and state tax credits; and minimizing the impact of the Alternative Minimum Tax (AMT).
Dan leads high-energy engagement teams in providing assurance solutions to clients across a wide variety of privately-held, commercial industries, including: Construction, Cannabis, Manufacturing & Distribution, Professional Services, Architecture & Engineering, and Insurance. He offers detailed reports about audit findings and communicates business-critical information to management, positively impacting their decision making.