The recent enactment of the One Big Beautiful Bill Act (OBBBA) by President Trump has ushered in significant changes to federal energy tax incentives. These modifications notably bring forward the expiration dates for several tax credits, impacting builders and remodelers who may need to adjust their plans accordingly. It is advisable for those affected to engage with tax professionals for tailored advice on the updated deadlines.
The National Association of Home Builders (NAHB) members should anticipate further directives from the IRS and Treasury concerning the OBBBA. The IRS is expected to adopt a stringent interpretation of the act’s phase-out provisions. In an executive order issued on July 7, President Trump instructed the Treasury to “strictly enforce the termination of the clean electricity production and investment tax credits under sections 45Y and 48E of the Internal Revenue Code for wind and solar facilities. This includes issuing new and revised guidance…”
Outlined below are the primary energy tax credits utilized in residential construction and remodeling, along with their revised expiration dates as per the OBBBA.
Section 45L New Energy Efficient Home Credit
This credit benefits builders of energy-efficient single-family and multifamily homes that meet Energy Star or Zero Energy Ready Home standards. Originally extended under the Inflation Reduction Act through 2032, it will now end for homes acquired post-June 30, 2026.
Section 25D Residential Clean Energy Credit
Homeowners can claim a 30% tax credit for clean energy installations like solar panels and geothermal systems. This credit, previously extended through 2035 by the Inflation Reduction Act, will now cease for expenditures made after December 31, 2025.
Section 48E Clean Electricity Investment Credit
The Section 48 Investment Tax Credit transitioned to a technology-neutral model under Section 48E starting this year, covering non-emitting technologies like solar and wind. Under the OBBBA, the credit terminates for installations after December 31, 2027, unless construction starts by July 4, 2026, and is completed within four years.
Note: Earlier drafts of OBBBA sought to exclude solar leasing companies from claiming Section 48E, but the final version allows leased residential solar panel systems, though not leased solar water heaters or small wind systems.
Section 179D Energy Efficient Commercial Buildings Tax Deduction
This deduction provides a tax benefit for energy-efficient upgrades in commercial buildings, including multifamily residences, under the ASHRAE standard. The deduction will expire for projects starting after June 30, 2026.
Section 25C Energy Efficient Home Improvement Tax Credit
Homeowners can claim credits for energy-efficient improvements like windows and HVAC systems. The OBBBA advances the expiration to post-December 31, 2025, for properties placed in service.
Original Story at www.nahb.org