On February 21, 2006, the Internal Revenue Service provided guidance regarding the energy efficient homes credit available under the Energy Policy Act of 2005 to homebuilders.

Energy Credit for Home Builders

Under the new provision, an eligible contractor who constructs a qualified new energy efficient home may qualify for a credit of up to $2,000. The credit is available for all new homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards.

The home qualifies for the credit if:

* It is located in the United States;
* Its construction is substantially completed after August 8, 2005;
* It meets the statutory energy saving requirements, and
* It is acquired from the eligible contractor after December 31, 2005, and before January 1, 2008, for use as a residence.

In general, to meet the energy saving requirements, a home must be certified to provide a level of heating and cooling energy consumption that is at least 30 to 50 percent in the case of manufactured homes, and 50 percent for other homes below that of a comparable home constructed in accordance with the standards of the 2004 Supplement to the 2003 International Energy Conservation Code. It must also have building envelope component improvements providing a level of heating and cooling energy consumption that is at least 10 percent below that of a comparable home. Manufactured homes can also qualify for the credit by meeting Energy Star standards.


* Site-built homes qualify for a $2,000 credit if they reduce energy consumption by 50 percent relative to the International Energy Conservation Code standard.
* Manufactured homes qualify for a $1,000 or $2,000 credit depending on the level of energy savings achieved.

With issuance of guidelines on claiming energy credits, homebuilders can now pursue energy efficient homes and reap economic benefits from doing so.