Big Beautiful Bill Ending Federal Energy Credits in 2025

If you’re planning to upgrade your home with a heat pump, solar panels, or other energy-efficient improvements, now is the time to act. The Big Beautiful Bill renewable energy incentives are ending after 2025, making this your final chance to take full advantage of these valuable tax credits. Recent changes under the bill, signed into law on July 4, 2025, will end or reduce many of the most popular residential credits after this year.

Here’s what homeowners and builders should know before moving forward with their projects. 

What Changed in 2025? 

The Inflation Reduction Act of 2022 created generous tax credits to encourage energy-efficient upgrades through 2032. But the One Big Beautiful Bill Act (PDF)  cuts many of those renewable energy credits short. 

Two major residential incentives—the Energy Efficient Home Improvement Credit (25C) and the Residential Clean Energy Property Credit (25D)—are both set to expire for systems installed after December 31, 2025. 

Residential Energy Tax Credits (Available Through 2025) 

Energy Efficient Home Improvement Credit (25C) 

This credit covers 30% of qualifying upgrade costs, up to the following annual limits: 

• $2,000 for qualified heat pumps and heat pump water heaters 

• $600 for electrical panel upgrades (when installed with a heat pump or HPWH) 

• $1,200 combined annual cap for insulation, windows, doors, and energy audits 

Deadline: The equipment must be installed and placed in service by December 31, 2025, to qualify. 

See IRS 25C Details 

What’s Covered: 

• Heat pumps and HPWHs (heat pump water heaters, which use ambient air to efficiently heat water like a reverse refrigerator) 

• Electrical panel upgrades (when paired with heat pumps) 

• Insulation, doors, windows, and air sealing 

• Home energy audits that meet IRS requirements 

Important Notes: 

• This credit is nonrefundable (it can reduce your tax bill but won’t result in a refund). 

• Labor costs can be included for heat pump, electrical, and HVAC work—but not for insulation, doors, or windows. 

• Credit cannot be carried forward if your tax liability is lower than the eligible amount. 

Residential Clean Energy Property Credit (25D) 

This separate credit covers 30% of the total cost for qualifying clean energy systems, with no annual or lifetime dollar cap (except for fuel cells). 

Deadline: Systems must be installed and operational by December 31, 2025, to qualify under current law. 

See IRS 25D Details 

What’s Covered: 

• Solar panels and solar water heaters 

• Geothermal heat pumps 

• Battery storage systems 

• Small wind turbines 

• Fuel cells (capped by system size) 

Key Benefits: 

• Labor and installation costs are eligible 

• Unused credit amounts can be carried forward to future years 

• Still nonrefundable, but more flexible than the 25C credit 

Credits for Builders & Commercial Properties 

Energy Efficient Home Credit (45L) 

Homebuilders can claim a credit of $2,500 to $5,000 per home for qualifying new construction that meets ENERGY STAR or DOE Zero Energy Ready standards. 

Deadline: Homes must be sold or leased by June 30, 2026 

Energy Efficient Commercial Buildings Deduction (179D) 

Commercial building owners can still claim deductions for energy efficiency improvements that reduce building energy use by at least 25%. These incentives were not affected by the BBB. 

Project Timing: What Qualifies for 2025 Credits? 

Final Year for Full Federal Benefits 

Unless new legislation is passed, 2025 is the final year these tax credits will be available for homeowners. Projects installed in 2026 or beyond will not qualify under current law, and no extensions have been announced. 

If you’re planning to install a new HVAC system, solar array, heat pump, or battery storage system, Paschal can help ensure it’s done right and done on time. We’ll also walk you through what paperwork and documentation you’ll need to claim available tax credits on your next return. 

Don’t Miss Out on 2025 Energy Tax Credits 

Federal incentives for heat pumps, solar systems, and other energy-efficient upgrades are ending soon. To qualify, your project must be installed and in service by December 31, 2025. 

Not sure about the type or age of your system?  How much would a replacement cost and are there any tax credits available for your home?  Schedule a No-Cost Free Estimate today 

Schedule now 

Want to Learn More About Federal Energy Tax Credits? 

You can read more about the Big Beautiful Bill renewable energy tax credits directly from the sources: 

• IRS Energy Efficient Home Improvement Credit (25C) 

• IRS Residential Clean Energy Credit (25D) 

• One Big Beautiful Bill Act – Full Text (PDF) 

• Kiplinger: Energy Efficiency Credits – Get Them While You Can