This year would be the last for a 30% tax credit for home solar panels and a $7,500 credit for electric vehicles under a budget proposal introduced this week in the US House of Representatives.
It’s still early in what could be a lengthy and contentious process for the federal budget. The big issue is how President Donald Trump and Republican lawmakers will find enough spending cuts to continue the tax cuts first passed in 2017.
Under language added to the budget proposal by the House Ways and Means Committee this week, several tax credits created or expanded in the 2022 Inflation Reduction Act that focus on clean energy would expire after this year. House leaders are eyeing a full vote on the bill by Memorial Day, after which it would head to the Senate. Democrats voiced opposition to ending the credits, which were a key part of President Biden’s energy agenda. Some House Republicans, meanwhile, called for even more cuts of energy credits in derailing a House Budget Committee vote on the budget measure Friday.
Clean energy industry groups and others are already gearing up to fight the proposal, and some Congressional Republicans have previously expressed a desire not to terminate the tax credits.
What energy and electric vehicle credits would change
The proposal would essentially nix tax credits for home energy and electric vehicles in the IRA.
According to the plan, the residential clean energy credit, which provides a 30% tax credit for home solar panels, batteries, geothermal heat pumps and more, would expire at the end of 2025. The credit is set to expire at the end of 2034. The tax credit for rooftop solar panels has existed, in some form or another, since 2005.
The clean vehicle credit, which provides up to $7,500 for new electric vehicles, would also expire at the end of the year, instead of 2032. An exception would allow buyers to claim the credit during 2026 on vehicles that haven’t sold 200,000 units as of the end of 2025.
The energy efficient home improvement credit, which covers items like home energy audits, heat pumps, air conditioners and water heaters, would also be cut at the end of 2025, instead of its current expiration date of 2033.
These changes, if they pass, wouldn’t affect vehicles or projects purchased in 2025 — including any purchases you may have already made with the tax benefits in mind.
Taxpayers claimed more than $6 billion under the clean energy credit and $2 billion under the energy efficient home improvement credit in 2023, the first full year they were available at the IRA’s rates, according to IRS data. More than 750,000 tax returns claimed a credit for rooftop solar panels that year.
Electric vehicles could get more expensive if a tax credit of up to $7,500 expires.
Nothing is final yet
The federal budget process is a bit more complicated than the I’m Just a Bill song in Schoolhouse Rock, but the important note at this point is that the process is only beginning.
Groups backing clean energy have already started to oppose the proposal. Abigail Ross Hopper, president of the Solar Energy Industries Association, said in a statement Monday that the changes would be devastating to efforts to build domestic manufacturing of solar technology. She also criticized the proposed cut of the residential credit for undermining “our individual liberties and freedom to choose how we power our homes.”
“By effectively repealing the clean energy tax credit for homeowners, it rips consumer choice away from millions of hardworking Americans,” she said in a statement.
A broad repeal of the IRA’s provisions could also generate resistance from Republicans in the House, where the party holds a very narrow majority, and more than a few holdouts could derail a bill. In a March letter, 21 House Republicans urged a “targeted and pragmatic” approach to energy policy changes.
