IRS Instruction 8908 – In today’s environmentally conscious world, building energy-efficient homes not only helps reduce carbon footprints but also offers significant tax incentives for contractors. The Energy Efficient Home Credit, claimed via IRS Form 8908, rewards eligible builders for constructing or reconstructing homes that meet stringent energy standards. This article breaks down IRS Instruction 8908, eligibility requirements, credit amounts, and how to claim this valuable tax benefit. Whether you’re a homebuilder, contractor, or developer, understanding these instructions can help maximize your tax savings in 2026.
What Is the Energy Efficient Home Credit?
The Energy Efficient Home Credit, also known as the 45L tax credit, is a federal incentive designed to promote energy conservation in residential construction. It provides a per-home tax credit to eligible contractors who build or substantially reconstruct energy-efficient homes that are sold or leased for residential use. This credit stems from Internal Revenue Code Section 45L and was significantly expanded and extended under the Inflation Reduction Act of 2022 (IRA).
The credit applies to qualified new energy-efficient homes acquired by another person during the tax year for use as a residence. It’s available for homes acquired after December 31, 2022, but due to recent legislative changes under the One Big Beautiful Bill Act (OBBBA), the credit expires for homes acquired after June 30, 2026. For tax years beginning in 2025 or later, use the December 2025 revision of Form 8908 and its instructions.
Who Is Eligible for the Credit?
Eligibility is limited to “eligible contractors,” typically builders or developers who meet specific criteria:
- Construction or Reconstruction: You must construct a new home or substantially reconstruct and rehabilitate an existing one into a qualified energy-efficient home.
- Ownership: You must own the home (with a basis in it) during the construction phase.
- Sale or Lease: The home must be sold or leased to another person for use as a primary residence.
- Location: The home must be located in the United States.
Substantial reconstruction generally involves rebuilding the home to meet energy efficiency standards, such as through major renovations. The credit is claimed in the tax year the home is acquired (i.e., when ownership transfers or the lease begins). Note that the credit is for contractors only—not homeowners.
What Qualifies as an Energy-Efficient Home?
A qualified energy-efficient home must meet energy-saving requirements under IRC Section 45L(c) and be certified accordingly before acquisition. Homes include:
- Single-family homes (detached houses).
- Manufactured homes compliant with Federal Manufactured Home Construction and Safety Standards.
- Multifamily units (e.g., apartments), as defined under Energy Star programs.
For homes acquired from 2023 through June 30, 2026, qualification is based on certification under:
- Energy Star Residential New Construction Program: Homes must meet specific single-family or multifamily requirements.
- DOE Zero Energy Ready Home Program: Higher standards for near-zero energy consumption.
For homes acquired before 2023, standards focused on 30% or 50% reductions in heating and cooling energy use compared to reference homes, with specific envelope improvements.
Certification must be obtained from an independent third party and confirm compliance with the applicable program requirements. For Energy Star, use eligible versions like SFNH National v3.2 for 2025 certifications.
Credit Amounts: How Much Can You Claim?
The credit amount varies based on the home’s certification level, type, and whether prevailing wage requirements are met. For homes acquired through June 30, 2026:
| Certification Level | With Prevailing Wages | Without Prevailing Wages |
|---|---|---|
| Energy Star Certified (Single-Family or Multifamily) | $2,500 per home/unit | $500 per home/unit |
| Zero Energy Ready Home Certified (Single-Family or Multifamily) | $5,000 per home/unit | $1,000 per home/unit |
For pre-2023 acquisitions, credits were $1,000 or $2,000 based on energy savings percentages. There’s no limit on the number of homes you can claim, making this especially beneficial for large-scale developers.
Prevailing Wage Requirements Explained
To qualify for the higher credit tiers ($2,500 or $5,000), you must comply with prevailing wage rules under the IRA. This means paying laborers and mechanics (employed by you, contractors, or subcontractors) at least the prevailing wage rates for similar work in the locality, as determined by the Department of Labor.
If prevailing wages aren’t met, the credit drops to the lower amounts ($500 or $1,000). To substantiate compliance, attach documentation to your tax return, including:
- Home location.
- Wage determinations for each worker classification.
- Wages paid and hours worked per classification.
- Details on any correction or penalty payments for non-compliance.
How to File Form 8908: Step-by-Step Instructions?
Filing is straightforward but requires careful adherence to IRS Instruction 8908. Use Form 8908 to report the number of qualified homes and calculate the credit. Attach it to your tax return (e.g., Form 1040, 1120, or 1065) for the year the homes are acquired.
Key lines from the form instructions (based on the December 2025 revision):
- Line 1: Enter the number of homes eligible under Energy Star single-family requirements (not zero energy ready) – credit $2,500 each (with prevailing wages).
- Line 2: Zero energy ready homes under Energy Star – $5,000 each.
- Line 3: Multifamily homes under Energy Star – $2,500 each.
- Line 4: Zero energy ready multifamily – $5,000 each.
- Lower lines for non-prevailing wage scenarios.
Retain certifications and supporting documents for at least three years. Consult a tax professional to ensure compliance, especially for prevailing wages.
Recent Changes and Important Deadlines
The IRA expanded the credit to include multifamily units and increased amounts, but the OBBBA accelerated the expiration. Homes must be acquired by June 30, 2026, to qualify – based on closing date or lease start, not contract signing. For 2025 certifications, ensure your homes meet the latest Energy Star versions to avoid ineligibility.
FAQs About IRS Form 8908 and the Energy Efficient Home Credit
What if my home doesn’t meet prevailing wage requirements?
You’ll still qualify for the base credit ($500 or $1,000 per home), but you must document this on your return.
Can manufactured homes qualify?
Yes, if they meet Energy Star or Zero Energy Ready standards and federal safety requirements.
How do I get certification?
Work with accredited raters through Energy Star or DOE programs. Certification must occur before the home is sold or leased.
Is there a cap on the total credit?
No per-taxpayer limit – claim for every qualified home in the tax year.
For the most up-to-date guidance, visit the IRS website or consult the official Instructions for Form 8908. Building energy-efficient homes isn’t just good for the planet—it’s smart for your bottom line. If you’re planning projects in 2026, act now to secure these credits before the June 30 deadline.