Energy Efficiency Tax Credits Phase Out Faster Than Planned Under New Tax Law by Adam Fisher, CPA
Posted on August 14, 2025
by
Adam Fisher
The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, makes dramatic changes to prior tax laws that encouraged individual and business taxpayers to invest in clean energy solutions that reduce carbon emissions. In many cases, taxpayers have a very narrow window of opportunity to claim these credits that are expiring at a much faster pace than initially planned.
Tax Credits and Deductions for Businesses
The OBBBA expedites the timeline for real estate developers and contractors to claim an Energy-Efficient Home (EEH) Tax Credit when they install qualifying property that meets the minimum clean-energy standards of the Environmental Protection Agency’s (EPA’s) Energy Star program and the Department of Energy’s Zero Energy Ready Home (ZERH) program. Under the law, the installation of qualifying property (i.e., interior lighting; heating, ventilating, air conditioning and hot water systems; and exterior doors and windows) on new or substantially reconstructed homes must begin before June 30, 2026, rather than the original deadline of Dec. 31, 2032.
In addition, all businesses looking to adopt clean energy solutions for their fleets of commercial vehicles must purchase a qualifying electric vehicle by no later than Sept. 30, 2025, to claim a credit of up to $7,500 for vehicles less than 14,000 pounds or $40,000 for larger buses and trucks weighing 14,000 pounds or more.
Finally, businesses that install products or facilities that store or dispense alternative fuels to motor vehicles, including electric charging stations and bidirectional charging equipment, must place qualifying property in service by June 30, 2026, to be eligible for an Alternative Fuel Vehicle Refueling tax credit that equals 30 percent of the cost of each piece of equipment up to a maximum of $100,000. The previous deadline to qualify for the credit was Dec. 31, 2032.
Tax Credits for Individual Taxpayers
Clean Vehicle Tax Credit
The OBBBA eliminates the Clean Vehicle Tax Credit on Sept. 30, 2025, instead of Dec. 31, 2031. This cuts short the availability of up to $7,500 in tax savings for the purchase of new electric, fuel-cell or hybrid vehicles that meet U.S.-assembly and -sourced battery component requirements and cost $80,000 or less for SUVs, vans and pickup trucks and $55,000 or less for sedans and passenger cars. To qualify for the credit, taxpayers’ modified adjusted gross income (MAGI) must fall below $150,000 for single taxpayers, or $300,000 for married taxpayers filing joint tax returns.
For used electric and fuel-cell vehicles costing $25,000 or less, the amount of the credit through Sept. 30, 2025, is 30 percent of the sale price up to a maximum credit of $4,000. To be eligible for the credit, taxpayers’ MAGI may not exceed $75,000 for single filers and $150,000 for married filing jointly.
Energy-Efficient Home Improvement Credit
The OBBBA expedites the sunsetting of the Energy Efficient Home Improvement tax credit to Dec. 31, 2025, from Dec. 31, 2032, for homeowners who make energy-saving improvements to their primary residence. The credit is equal to 30 percent of certain qualified expenses homeowners incur, including up to $1,200 per year for certain energy-efficient property costs and improvements to a home’s envelope (i.e., exterior doors and windows) and up to $2,000 per year for heat pumps, water heaters, biomass stoves and biomass boilers produced by qualifying manufacturers.
Taxpayers considering energy-efficient improvements to their primary residences have just a few more months to take advantage of this nonrefundable credit that can decrease or eliminate their tax liabilities for the 2025 tax year.
Residential Clean Energy Tax Credit
The deadline for taxpayers to claim a Residential Clean Energy Tax Credit that is equal to 30 percent of new, qualified clean-energy property improvements to a primary or secondary home moves up to Dec. 31, 2025, from 2034. Taxpayers considering solar electric panels, solar water heaters, geothermal heat pumps, fuel cell property or battery storage technology must complete the installation of these technologies by the end of 2025 to qualify for credit.
About the Author: Adam Fisher, CPA, is an associate director of Real Estate Tax Services with Berkowitz Pollack Brant, where he helps property developers, contractors and owners improve cash flow and maximize tax efficiency through a variety of tax credits and deductions. He can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or info@bpbcpa.com.
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