Phase-Out of Green Energy Tax Credits

On July 4th, President Trump signed a major new tax law: the One Big Beautiful Bill Act (OBBBA). The new legislation builds upon the 2017 Tax Cuts and Jobs Act (TCJA) and brings several changes to the tax code.

How will this impact your taxes? In this article, we explore the phase-out of federal green energy tax credits. But first, what is a tax credit? Check out this article on Tax Credits vs. Tax Deductions for a quick overview.

Phase-Out of Green Energy Tax Credits

Several tax incentives that encourage individuals to invest in clean energy are being rolled back under new legislation. These changes reduce federal support for energy-efficient vehicles and home improvements.

If you’ve been considering purchasing an electric vehicle or upgrading your home with clean energy improvements, it’s important to note the upcoming deadlines. Tax professionals should help clients plan ahead before these opportunities expire.

Key Deadlines

Credit	Description	Credit Amount / Limits
After Sept. 30, 2025
Clean Vehicle Credit (§30D)	Federal tax credit for new qualifying electric vehicles (EVs) meeting requirements for battery components, final assembly, and price caps. Income limits apply.	Up to $7,500
Previously Owned Clean Vehicle Credit (§25E)	Credit for purchasing a qualifying used EV or fuel cell vehicle that meets age, price, and eligibility requirements. Income limits apply.	Up to $4,000 (or 30% of purchase price, whichever is less)
Qualified Commercial Vehicles Credit (§45W)	Credit for businesses and tax-exempt orgs purchasing qualifying electric or fuel cell commercial vehicles. Applies to trucks, vans, buses, etc.	Up to 30% of cost (15% for hybrids). Max: $7,500 (<14,000 lbs) or $40,000 (≥14,000 lbs)
After Dec. 31, 2025
Energy-Efficient Home Improvement Credit (§25C)	Credit for homeowners making energy-efficient upgrades (insulation, windows, doors, HVAC, water heaters, electrical upgrades).	30% of costs. Annual max: $1,200 (+ $2,000 for heat pumps, biomass stoves, boilers)
Residential Clean Energy Credit (§25D)	Credit for renewable energy systems in homes (solar panels, solar water heaters, wind turbines, geothermal, battery storage, fuel cells).	30% of qualified costs (through 2032, then phased down)

As you can see, the OBBBA eliminates several high-profile credits related to renewable energy. The expiration of these incentives could influence planning around electric vehicle purchases, solar energy projects, and energy-efficient home upgrades, so be sure to plan ahead.

Key Takeaways

• Credits for electric vehicles and residential clean energy improvements will begin phasing out in late 2025.

• Taxpayers considering these upgrades should act before the deadlines to maximize available savings.