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Act Now: Key Energy Tax Credits Set to Expire Sooner

As climate change remains a pressing global issue, the U.S. federal government has been incentivizing homeowners and consumers to adopt sustainable energy solutions. These incentives have been provided in the form of tax credits for initiatives such as installing solar panels, upgrading home systems to energy-efficient models, and purchasing electric vehicles (EVs). However, the "One Big Beautiful Bill" Act is changing the expiry timelines of these tax credits, urging consumers to act quickly in order to leverage these benefits.

Residential Solar Tax Credits - The Residential Clean Energy Credit has been pivotal in motivating homeowners to install solar systems. Previously, it enabled a 30% deduction from federal taxes for the cost associated with solar installations, covering solar electric property, solar water heating systems, geothermal heat pumps, and wind energy systems.

Originally, systems installed through December 31, 2032, qualified for this credit. However, the "One Big Beautiful Bill" has accelerated the expiration to December 31, 2025, necessitating swift action by homeowners to benefit from this credit. It’s crucial that the installation is completed and approved by a building inspector before this deadline.

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Improvements in Energy Efficiency - The Energy Efficient Home Improvement Credit, aimed at improving homes with energy-efficient modifications, initially allowed homeowners to claim 30% of improvement costs, up to $1,200 annually. Eligible improvements included high-efficiency HVAC systems, better insulation, and energy-effective windows and doors.

While initially available until December 31, 2032, the new legislation moves this credit’s expiration to December 31, 2025. This necessitates quick decision-making and processing by homeowners who want to capitalize on this tax incentive, especially considering the required final inspections by local authorities.

Electric Vehicles (EV) Credits

  1. New EV Credit: The Clean Vehicle Credit, previously offering up to $7,500 for new EVs, has significantly changed. It's designed to promote eco-friendly vehicles by satisfying critical mineral and battery component criteria, supporting U.S. manufacturing and sustainable supply chains.

    Under prior regulations, eligibility was assured for cars purchased by 2032, but now it is set to expire on September 30, 2025, for cars bought thereafter. This prompts consumers to promptly finalize their purchases to utilize the credit.

  2. Used EV Credit: The Previously Owned Clean Vehicles Credit offered the lesser of $4,000 or 30% of the used EV's sale price to encourage such purchases. Restrictions included income caps, sales price limits of $25,000, and mandatory registration of sellers as dealers.

    Initially intending to run till 2032, the credit will now cease on September 30, 2025, requiring prospective buyers to strategize swiftly due to changing vehicle inventories.

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Immediate Action Required - This legislative overhaul signals a strong call to action for consumers and homeowners to act promptly. The reduction of these tax credits, once easing the transition to greener solutions, reflects a paradigm shift in government support for sustainable practices.

This policy change underscores the urgent need for consumers considering renewable energy investments or the purchase of clean vehicles to accelerate their timelines, ensuring all necessary steps, inspections, and paperwork are finalized ahead of the new deadlines.

For more information on eligibility and deadlines, please contact our office. Ensure your transition to sustainable solutions is in alignment with these federal tax opportunities before they are phased out.

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