Blog
We keep you up to date on the latest tax changes and news in the industry.
Last Chance: The One Big Beautiful Bill Countdown on Key Energy Tax Credits
In recent years, as the conversation about climate change has intensified, the federal government sought to encourage homeowners and consumers towards sustainable energy solutions by providing tax credits for various green initiatives. The installation of solar panels, upgrading to energy-efficient home systems, and purchasing electric vehicles (both new and used) have all been incentivized. However, a sweeping legislative change known colloquially as the "One Big Beautiful Bill" Act significantly alters the landscape of these tax credits, accelerating their expiration and thus requiring consumers to mobilize and act quickly if they wish to take advantage of the related tax benefits.
Home Solar Energy Credits - The Residential Clean Energy Credit has been a linchpin in encouraging homeowners to invest in solar electric properties. Prior to the new legislation, this credit offered a significant financial incentive, allowing a 30% deduction from federal taxes of the cost of installing solar systems. This applied to installations of qualified solar electric property, solar water heating property, geothermal heat pumps, and wind energy systems.
Under previous regulations, expenditures made for property placed in service through December 31, 2032, were eligible for the credit. However, the "One Big Beautiful Bill" mandates a new, aggressive sunset date: December 31, 2025. This means that homeowners must have their systems installed and functional by this deadline to benefit. It’s crucial for homeowners to not only install the solar energy property, but also ensure a building inspector's sign-off before the curtains fall on this credit.
Home Energy Efficient Improvements Credit - The Energy Efficient Home Improvement Credit was offered to taxpayers improving their residence with qualified energy efficiency improvements. Homeowners could claim 30%, up to $1,200 annually, of the cost associated with improvements such as high-efficiency HVAC systems, upgraded insulation, exterior doors, and energy-efficient windows and skylights.
This credit was originally available for qualifying property placed in service by December 31, 2032. However, the new legislative act changes this, imposing a new expiration date of December 31, 2025. This fast-approaching deadline means homeowners looking to capitalize on this tax incentive need to act quickly. Notably, efficiency improvements often require final approval from local building inspectors, further underscoring the necessity for immediate action.
Credits for Electric Vehicles (EV)
The New EV Credit: The Clean Vehicle Credit, designed to encourage the purchase of new clean vehicles, has similarly seen shifts. This federal incentive provided a credit of up to $7,500 for each new EV placed in service, contingent on meeting critical mineral and battery component requirements. The aim was to motivate domestic manufacturing and the development of reliable, sustainable supply chains.
The maximum cost of the vehicle (manufacturer’s suggested retail price (MSRP)) cannot be more than $80,000 for vans, pickups and SUVs, and $55,000 for others. In addition, the vehicle must be assembled in the U.S.
While prior law allowed eligibility for purchases through 2032, the act now terminates this benefit for vehicles acquired post-September 30, 2025. This acceleration demands that consumers fast-track their buying decisions to avail themselves of the credit.
The Previously Owned EV Credit: Similarly, the Previously Owned Clean Vehicles Credit encouraged purchases of used electric vehicles. This credit offered the lesser of $4,000 or 30% of the vehicle’s sale price, with restrictions on qualifying vehicles, as well as income caps for purchasers to be eligible, limits on sale prices not exceeding $25,000, and requirements mandating that sellers must be registered dealers.
Initially set to cease in 2032, the new legislation advances this credit’s expiration to September 30, 2025. Prospective buyers must act swiftly and strategically, especially as vehicle inventories adjust in response to the regulatory shift.
The Urgency to Act - This comprehensive shift in energy-focused tax credits, facilitated by the "One Big Beautiful Bill," communicates a clear message to consumers and homeowners: act now or risk missing out on financial incentives encouraging the adoption of sustainable technologies.
Consumers venturing into energy improvements and environmentally friendly vehicles must rev up their planning, procurement, and installation timelines. The reduction of these tax credits, once aimed at easing the burden of going green, indicates a notable policy shift that contradicts previous trends in government-backed incentives for sustainable practices.
Call to Action - For those contemplating renewable energy investments or the addition of clean vehicles to their household, the message is urgent yet clear—complete your installations and purchases promptly. Ensure all necessary inspections and paperwork are finalized well in advance of the adjusted deadlines.
As these federal tax credits prepare for their impending departure, the chance to capitalize on them shrinks by the day. The "One Big Beautiful Bill" has set the stage for a contentious legislative landscape in environmental initiatives, stressing the necessity for decisive action to close the book on this chapter of incentivized green energy transitions.
If you have questions related to qualifications and deadlines for the credits, contact this office.
Sign up for our newsletter.
Each month, we will send you a roundup of our latest blog content covering the tax and accounting tips & insights you need to know.
We care about the protection of your data.
“We are always looking to grow our business. Should you have any clients, friends, business associates looking for high quality accounting services from a CPA firm, please have them contact us.”
This e-mail (including any attachments) is only for the exclusive use of the individual to whom it is addressed. The information contained hereinafter may be proprietary, confidential, privileged and exempt from disclosure under applicable law. If the reader of this e-mail is not the intended recipient or agent responsible for delivering the message to the intended recipient, the reader is hereby put on notice that any use, dissemination, distribution or copying of this communication is strictly prohibited. If the reader has received this communication in error, please immediately notify the sender by telephone or e-mail and delete all copies of this e-mail and any attachments.
IRS Circular 230 Disclosure: In order to ensure compliance with IRS Circular 230, we must inform you that any U.S. tax advice contained in this transmission and any attachments hereto is not intended or written to be used and may not be used by any person for the purpose of (i) avoiding any penalty that may be imposed by the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.