The recently enacted One Big Beautiful Bill Act (OBBA) brings changes to federal energy tax credits. If you’re planning energy-efficient upgrades or investments to your home, it’s crucial to understand these updates and the new deadlines to maximize your tax benefits.
Energy Efficient Home Improvement Credit – Ending Soon
What’s Changing?
- The Energy Efficient Home Improvement Credit allows homeowners to claim a credit for 30% of the cost of qualified energy efficiency improvements, such as insulation, exterior doors and windows, certain heating and cooling systems, and home energy audits.
- OBBBA sets a hard deadline: The credit will no longer apply to property placed in service after December 31, 2025. This is a significant acceleration of the phase-out, as the energy tax credit was previously available through 2032.
Key Limits (for 2025):
- $1,200 annual limit for most improvements.
- $2,000 annual limit for heat pumps, heat pump water heaters, and biomass stoves/boilers.
- $600 limit for windows, $500 for exterior doors, and $150 for home energy audits.
Action Item: If you’re considering energy-efficient upgrades, complete installation by December 31, 2025 to claim the credit.
Residential Clean Energy Credit – Also Ending Early
What’s Changing?
- The Residential Clean Energy Credit provides a 30% credit for solar panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage.
- OBBBA terminates this energy tax credit for expenditures made after December 31, 2025 (previously available through 2034).
Key Features:
- No annual or lifetime dollar limit (except for fuel cells).
- Unused credits can be carried forward to future years.
- Applies to both primary and secondary residences (but not rental properties)
Action Item: Install and pay for qualifying clean energy systems by December 31, 2025 to secure the credit.
- If you are considering buying or leasing an EV, act before September 30, 2025, to access both federal and state incentives.
- Confirm that the vehicle meets eligibility criteria such as MSRP, battery sourcing, and assembly requirements.
- Retain all required documentation and consult with a financial advisor to align your decision with your broader goals.
Takeaways
- Act quickly: Many popular energy tax credits are ending much sooner than previously scheduled.
- Plan installations and purchases to meet the new deadlines.
- Consult your tax advisor to ensure compliance and maximize your benefits under the new law.
If you have questions about how these changes affect your specific situation, please contact our office for personalized guidance.
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