In recent years, taxpayers saw a wave of federal tax incentives aimed at promoting and rewarding clean energy usage. These credits not only encouraged individual taxpayers and businesses to transition to greener technologies, but they offered substantial savings for those willing to make sustainable investments in their homes, cars, and businesses.
When the One Big Beautiful Bill Act (OBBBA) passed in early July 2025, many of the clean energy tax credits introduced or revamped as part of the 2022 Inflation Reduction Act were affected. Some were revised, but others have been axed altogether.
While you may still want to pursue a clean energy upgrade for the long-term cost savings or environmental impact, it’s important to know how previously available tax incentives are changing.
Let’s rewind to 2022
Signed into law in August 2022, the Inflation Reduction Act (IRA) marked a historic investment in both clean energy and climate action. The law dedicated over $370 billion to initiatives that aimed to curb greenhouse gas emissions, improve energy efficiency, and spur innovation across the renewable energy sector.1
Individual taxpayers gained access to expanded and newly created tax credits, including:
- Up to $7,500 for qualifying new electric vehicles (EVs)2
- Up to $1,200 annually for energy-efficient home improvements like insulation, heat pumps, and new windows3
- A 30% residential clean energy credit for installing rooftop solar, battery storage, or geothermal systems3
Most of these provisions were designed to last into the 2030s, offering a long runway for taxpayers looking to go green.
Introducing the 2025 One Big Beautiful Bill Act (OBBBA)
On July 4, 2025, the One Big Beautiful Bill Act was signed into law, ushering in the first major tax overhaul of President Trump’s second term. At over 1,000 pages, the OBBBA introduced sweeping changes including:
- Extending TCJA-era tax cuts
- Creating new deductions (like a “super deduction” for seniors)
- Rolling back federal spending on several social and environmental programs
While the bill preserved or even expanded some individual tax benefits, it also targeted several of the clean energy incentives introduced under the Inflation Reduction Act. Many credits were eliminated, while others became subject to much stricter eligibility rules.
Let’s take a closer look at what’s changed.
4 changes to clean energy credits
Below are four major energy-related tax incentives being impacted by the OBBBA.
The Residential Clean Energy Credit
Previously, homeowners who made certain home energy purchases and installations could receive a tax credit that was equivalent to 30% of the total improvement costs for the year the qualifying installation took place.
There was no limit for how much a homeowner could claim, as long as it didn’t exceed the 30% ceiling cap. According to the IRS, qualifying purchases and installations included:3
- Solar panels
- Geothermal systems
- Fuel cells and battery storage
- Wind power generation systems
- Solar water heaters
This credit was originally available to homeowners through the year 2032. Under the OBBBA, however, this credit will only be available for purchases made through December 31, 2025. In 2026, it will expire, and homeowners will no longer be able to claim the credit for clean energy-related installations.4
In addition, eligibility now excludes systems sourced from or assembled in countries categorized as “foreign entities of concern” (FEOCs)—more on that in a moment.
The Energy Efficient Home Improvement Credit
Previously, homeowners could claim up to $3,200 for qualifying energy-efficient home improvements made between January 1, 2023 and 2032.
The credit allowed homeowners to claim up to 30% of certain expenses including home energy audits and energy efficiency improvements and installations.
The total allowable credit per year was capped at $3,200, which is broken down by:5
- $1,200: Energy efficient property costs and home improvements (including additional limits on doors, exterior windows, skylights, and home energy audits)
- $2,000: Qualifying heat pumps, water heaters, biomass stoves, and biomass boilers
This credit will now expire at the end of 2025, meaning qualifying purchases made after December 31 will no longer be eligible.4
Electric vehicle tax credits
What is now known as the Clean Vehicle Credit was overhauled in 2022, allowing individual taxpayers and businesses to qualify for up to $7,500 in tax credit for purchasing qualifying new vehicles—namely plug-in EVs or fuel cell electric vehicles.2
This credit came with some complex qualifiers. Namely, the vehicle needed to be assembled (at the final stage) in North America, weigh less than 14,000 pounds, and meet mineral and battery source requirements. The credit was also limited by the car’s MSRP, as well as the purchaser’s adjusted gross income.2
In addition, the used clean vehicle credit allowed buyers to claim a tax credit of up to $4,000 (or 30% of the car’s sale price) for qualifying used electric and fuel cell vehicles.6
To remain eligible for these clean vehicle-related tax credits, vehicles will need to be purchased by September 30, 2025, according to the OBBBA.4
The Alternative Fuel Vehicle Refueling Property Credit also allowed homeowners to claim a credit of up to 30% of the cost of an at-home electric vehicle charging station. The credit was capped at $1,000 per qualifying purchase, which included:7
- Charging port
- Fuel dispenser
- Storage property
This credit will remain available to homeowners until June 30, 2026. That means related purchases or installations occurring after July 1 will not be eligible for the tax credit.4
Commercial clean energy credits
The OBBBA implements a number of cuts to energy-related tax credits or incentives for businesses and manufacturers.
These particular changes are rather wide and varied, but here’s a quick glimpse at how tax credits are changing on a larger scale:
The Clean Energy Investment Tax Credit and Production Tax Credit: Solar and wind facilities that are constructed after July 4, 2026 and/or placed into service after December 31, 2027 will not be eligible for the previously available Investment Tax Credit (ITC) or Production Tax Credit (PTC).4
The Energy Efficient Home Credit: Contractors who would either build or “substantially reconstruct” homes with qualifying energy-efficient upgrades could claim a tax credit of up to $5,000 per home.8 This credit will no longer be available after June 30, 2026, since the OBBBA eliminated it.4
The Energy Efficient Commercial Buildings Deduction: Commercial building owners and designers working on buildings owned by specified tax-exempt entities (such as tribal governments or Alaska Native corporations) could claim a tax deduction for installing qualifying energy-efficient systems. These included improved interior lighting, HVAC, ventilation, hot-water systems, and building envelope upgrades. This deduction was also available to those who retrofitted qualifying upgrades to existing commercial buildings.8,9 This deduction will no longer be available starting June 30, 2026, according to the OBBBA.
A note on FEOC rules
Many of the clean energy tax credits still available are subject to new FEOC Rules, which provide further restrictions on who can and can’t qualify for credits.
Short for Foreign Entities of Concern, this designation applies to companies or countries that the federal government has determined pose national security risks, including adversarial governments and entities.4
Solar panels, battery components, wind turbines, or other clean energy products containing parts or materials sourced from FEOC-designated suppliers will now disqualify the project from most clean energy tax credits.
Considering going green? Now’s the time to act.
If you’re a homeowner who has been on the fence about installing solar panels, purchasing an EV, or upgrading your HVAC system, the time to enjoy certain tax advantages is ending shortly.
With credits being reduced or phased out and FEOC rules tightening eligibility, many of the financial incentives available today are set to disappear in the next 12–24 months. While clean energy improvements can still be meaningful for you, your family, and your home, the tax benefits may be much smaller moving forward.
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