Energy and Clean Vehicle Credit Phaseouts: Last-Chance Planning

On July 4, 2025, Congress passed the Reconciliation Bill (H.R. 1), introducing significant changes for homeowners, small businesses, and manufacturers pursuing clean energy initiatives. With many valuable tax incentives set to expire, now is a critical time to act. This guide outlines the key credits being phased out, what they offer, and the steps you should take to maximize your benefits before the deadlines.

Clean Vehicle Credits (Section 30D/25E - Personal and Section 45W - Business)

The Clean Vehicle Credits will expire for vehicles purchased after September 30, 2025. Taxpayers considering electric vehicle (EV) purchases should act promptly.

• New EVs: Up to $7,500 credit if the vehicle is assembled in North America, meets MSRP limits ($80,000 for vans, SUVs, trucks; $55,000 for other vehicles), and the buyer’s modified adjusted gross income is below $150,000 (single), $225,000 (head of household), or $300,000 (married filing jointly). Eligibility depends on the make and model. Visit fueleconomy.gov for the current list of qualifying vehicles. If purchased from a registered dealer, the credit may be applied at the point of sale.
• Used EVs: Up to $4,000 or 30% of the sale price (whichever is less). The vehicle must be at least two years old, sold by a dealer for $25,000 or less, and the buyer must meet lower income thresholds ($75,000 single; $112,500 head of household; $150,000 married filing jointly). This credit may also be applied at the point of sale.
• Commercial Clean Vehicle Credit: Businesses may claim up to $40,000 for electric or fuel cell vehicles placed in service before September 30, 2025. The credit equals the lesser of 30% of the purchase price (15% for vehicles without batteries) or the full purchase price, capped at $7,500 for vehicles under 14,000 pounds and $40,000 for heavier vehicles. There are no income or MSRP limits, and final assembly and battery sourcing requirements do not apply.

Residential Clean Energy Credit (Section 25D)

This credit covers up to 30% of the cost of qualifying home energy improvements such as solar panels, battery storage, and geothermal systems—installed and placed in service by December 31, 2025. Homeowners should schedule installations now to ensure eligibility.

Commercial Building Energy Efficiency Deduction (Section 179D)

Available for new construction and energy-saving improvements to existing commercial buildings, this deduction phases out for projects beginning after June 30, 2026. The deduction is based on the lesser of the cost of improvements (minus prior deductions) or a fixed dollar amount per square foot, as determined by the IRS. Qualifying upgrades include efficient lighting, HVAC systems, and building envelope improvements. Businesses should initiate projects soon to secure this benefit.

Advanced Manufacturing Production Credit (Section 45X)

This credit is being phased out for several component categories:

• Wind energy components: No credit for items produced and sold after December 31, 2027.
• Critical minerals (excluding metallurgical coal): Phases out gradually—100% through 2030, then 75% in 2031, 50% in 2032, 25% in 2033, and eliminated after 2033.
• Metallurgical coal: Credit ends after December 31, 2029.

Credits are disallowed for components involving material assistance from prohibited foreign entities or for foreign-influenced taxpayers. Starting in 2027, integrated components may still qualify if at least 65% of material costs are U.S.-sourced. The definition of eligible battery modules now includes essential equipment such as current collectors and voltage harnesses.

Alternative Fuel Refueling Equipment Credit (Section 30C)

Taxpayers installing EV chargers may qualify for a credit of up to 30% of installation costs (capped at $1,000 for individuals and $100,000 per charging port for businesses), provided the equipment is placed in service before July 1, 2026, and located in a qualifying low-income or non-urban census tract. Confirm your location’s eligibility before proceeding.

New Energy Efficient Home Credit (Section 45L)

Builders and developers may claim up to $5,000 per home for qualifying energy-efficient homes sold or leased before June 30, 2026. Homes must meet ENERGY STAR or Zero Energy Ready Home (ZERH) standards, depending on the construction year and type. Contractors should begin projects promptly to meet the deadline.

Energy Investment Tax Credit (Section 45E - Commercial Solar/Wind)

Businesses investing in commercial solar or wind systems may still qualify for this credit if construction begins before July 4, 2026, and the system is placed in service by December 31, 2027. This credit can significantly reduce the cost of eligible energy systems and related equipment.

What You Should Do Now

The IRS will not offer grace periods after these deadlines—once they pass, the savings are gone. To take advantage of these expiring incentives:

1. Review your plans for energy-efficient upgrades or EV purchases.
2. Act quickly to ensure installation or acquisition before the applicable deadlines.
3. Consult a tax professional to confirm eligibility and compliance.‍
4. Maintain thorough documentation, including receipts, installation dates, and certifications, to support your claims.