Accelerated Sunset of Energy-Related Tax Credits for Individual Taxpayers
July 16, 2025
The recently enacted One Big Beautiful Bill Act (OBBBA) significantly shortens the lifespan of several energy-related income tax credits that were expanded or extended under the Inflation Reduction Act (IRA).
The table below compares (1) the credit terms under current law, (2) how the credits would have phased out absent the enactment of the OBBBA, and (3) the changes made by the OBBA.
|
Category |
Current Law (IRA of 2022) |
Post IRA (No New Law) |
New Law (OBBBA) |
|
Energy Efficient Home Improvement Credit (IRC §25C) |
Credit of 30% of qualified energy efficient home improvement costs with a maximum credit of $3,200 for amounts paid or incurred by the taxpayer for qualified energy efficiency improvements, residential energy property expenditures, or amounts paid for home energy audits (e.g., energy efficient doors, windows, heat pump water heaters, etc.) |
Expires with respect to any property placed in service after December 31, 2032 |
Expires with respect to any property placed in service after December 31, 2025 |
|
Residential Clean Energy Credit (IRC §25D) |
Credit of 30% of qualifying expenditures (e.g., solar electric property, solar water heating property, fuel cell property, small wind energy property, geothermal heat pump property, and qualified battery storage technology) |
The applicable percentage reduces from 30% to 26% to 22% before the credit expires with respect to property placed in service after December 31, 2034 |
Expires with respect to any property placed in service after December 31, 2025 |
|
Clean Vehicle Credit (IRC §30D) |
Credit of up to $7,500 with respect to each new clean vehicle placed in service during the taxable year |
Expires with respect to any vehicle placed in service after December 31, 2032 |
Expires with respect to any vehicle acquired after September 30, 2025 |
|
Previously-Owned Clean Vehicle Credit (IRC §25E) |
Credit of up to $4,000 for each previously-owned clean vehicle placed in service during the taxable year |
Expires with respect to any vehicle placed in service after December 31, 2032. |
Expires with respect to any vehicle acquired after September 30, 2025 |
|
Alternative Fuel Vehicle Refueling Property Credit (IRC §30C) |
Credit of 30% (subject to limitation) for the cost of any qualified alternative fuel vehicle refueling property placed in service by the taxpayer during the year |
Expires with respect to any property placed in service after December 31, 2032 |
Expires with respect to any property placed in service after June 30, 2026 |
Taxpayers and advisors should carefully note the new expiration dates established by the OBBBA and plan any energy-related home improvements or clean vehicle purchases accordingly to maximize available credits before these provisions sunset.
Click here to return to Larson & Company's One Big Beautiful Bill Act summaries.
Dakon is a Tax Partner at Larson & Company. He specializes in tax planning, preparation, and consulting for a wide range of businesses, from large multi-state companies to small closely held businesses. He is also our subject matter expert on international taxation.
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