The phaseout of energy tax credits: What you need to know

Key impacts of these changes

With the passage of H.R. 1 (U.S. Congress, H.R. 1, 2025. Sections 70505 and 70506), the following tax programs have been terminated:

Residential Clean Energy Credit

Previously, this credit allowed homeowners to claim 30% of the cost of renewable energy systems like solar panels, geothermal heat pumps, fuel cells, battery storage and wind turbines. 

Energy Efficient Home Improvement Credit 

Previously, this credit allowed homeowners to claim up to $1,200 annually (or up to $2,000 for heat pumps and biomass systems) for qualifying home improvements, including windows, doors, HVAC systems, insulation and energy audits.

The passing of H.R. 1 on July 4, 2025, immediately ended these federal credits, meaning that homeowners are no longer able to claim these benefits for upgrades.

If you made energy-efficient upgrades before H.R. 1 passed

If you installed qualifying equipment prior to the July 4, 2025, enactment of H.R. 1, you may still be eligible to claim tax credits for that installation, provided it meets the previous program’s qualifications and was installed during a tax year prior to legislative termination.

Whether a tax credit or provision still applies to you depends on your specific situation, since H.R. 1 introduced different effective dates for each change. If your installation happened close to one of those cutoffs, we recommend checking with a tax professional to see if you’re still eligible.

What options are still available?

While federal tax credits for energy efficiency have ended, there are several options to help homeowners interested in improving their homes' sustainability:

State and local incentives

Many states and municipalities still offer rebates, tax breaks or utility-run programs for upgrading to energy-efficient home appliances and systems. Visit the Department of Energy DSIRE database or ENERGY STAR Rebate Finder to see what's available in your area.

Renewable energy certificates (RECs)

Recent legislative changes under H.R. 1 have not impacted the Renewable Energy Certificate program. Renewable energy certificates (RECs) remain a valuable way to support the renewable energy economy, offset emissions and meet renewable portfolio standards (RPS).

By purchasing RECs, individuals and companies can still match their electricity use with renewable sources like wind and solar. This helps maintain momentum toward sustainability goals, despite the loss of federal tax incentives.

Understanding energy efficiency beyond tax credits

Even without federal credits, investing in energy efficiency can provide long-term savings. Lower energy bills, increased home comfort and energy efficiency remain strong reasons to upgrade your home. Here are some key tips:

• Look for ENERGY STAR® certified products
• Conduct an energy audit (local incentives may apply)
• Consider smart thermostats and efficient lighting
  
  

For more ways to save, read our blog that covers 25 energy-efficient tips.

Stay informed as policies evolve

Energy policy is dynamic. While H.R. 1 has ended certain federal programs, new opportunities may emerge. For the latest programs, visit the IRS website or check with the Department of Energy (DOE) for national and state-specific programs that may be available in your area. 

Please note, we do advise consulting with a licensed tax professional before making any final decisions.

Please note: This article is for informational purposes only and does not constitute personal tax advice. For guidance tailored to your specific situation, consult with a qualified tax professional.