Energy efficiency is an issue on many people’s minds as we blaze through the hot summer months. And this year, the topic may be more relevant than ever.
A new U.S. House of Representatives GOP tax plan could make many federal energy-efficient tax benefits, including federal solar panel and electric vehicle (EV) tax credits, go away.
The Biden administration expanded and extended the solar federal tax credit under the Inflation Reduction Act (IRA). Since then, 750,000 families claimed tax savings. Now, there's enough solar capacity nationwide to power over 37 million homes, according to the Solar Energy Industries Association.
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But the GOP’s latest proposal, called the “One Big Beautiful Bill Act,” includes a slew of tax provisions that could affect all Americans, including those claiming clean energy tax credits. This has reportedly caused some folks to accelerate plans for home solar installations.
Here’s more to know amidst the uncertainty and ways your family can potentially save on energy bills — before it's too late.
The residential and solar investment tax credit
The federal government currently offers tax credits for energy-efficient home improvements under the Inflation Reduction Act (IRA).
The federal solar tax credit, also known as the “Residential Clean Energy Credit.”
- Allows a deduction of up to 30% of qualified system costs.
- Is in effect through the end of 2032 (the credit decreases annually after that date until 2034).
The solar credit is available for water heaters, fuel cells, battery storage technology, and other qualifying projects. Not only can these clean home improvements lower your tax bill, but you may dip into some cost savings.
For more information, read Kiplinger’s report, IRS Solar Tax Credit Payouts Soar.
Is the solar tax credit going away in 2025?
Under the House GOP tax proposal, several key clean energy tax credits are in danger, including the residential solar investment tax credit.
According to the latest data released by the U.S. Department of the Treasury, about 1.2 million households utilize the credits for residential clean energy investments, with over $6 billion in savings.
But while the solar tax credit was already set to expire in 2032, the House GOP tax plan (if approved) would accelerate that, eliminating the credit at the end of 2025.
While proposals to slash clean energy tax breaks have caused some Senate backlash against the latest House bill, homeowners aren't waiting until the dust settles to see if the tax credit will remain.
An NPR report released earlier this year highlights how uncertainty surrounding the popular clean energy tax credit has caused some to accelerate their solar installation plans.
For instance, a Boston-area resident quoted by NPR described his efforts to expedite a home solar panel project, completing it before the end of last year. The urgency stemmed partly from concern that the new administration would reduce or eliminate the solar tax credit.
The report suggests this could be part of a broader trend as consumers and solar companies brace for policy shifts that could significantly impact the renewable energy landscape.
Notably, these concerns may also be for good reason besides the House GOP tax plan: tariffs on foreign solar panels have been introduced.
Solar panel investment and tariffs
- Seven years ago, solar tariffs began as part of a Trump administration bill that included washing machines.
- The tariff started at 30% for foreign imports and decreased by 5% each year.
- Three years ago, President Biden extended the then-15% tariff for another four years.
- Earlier this year, the Biden administration also enacted a 50% tariff on Chinese “solar cell” imports.
Now, since early April, Trump has entertained sweeping tariffs on almost all products from many countries, including China. While the Chinese tariffs are currently on a 90-day pause, what's happening with Trump tariffs has caused market instability and general panic about which goods might be scarce in the coming year.
To see how these tariffs might affect solar panel production in particular, here are a couple of quick facts about foreign solar investment:
- Chinese production companies serve almost half of the U.S. solar market, according to the Institute for Energy Research.
- However, foreign solar panel investment in the U.S. has increased, with one company investing over $2.5 billion in expanding U.S.-based manufacturing operations.
Additionally, as Kiplinger has reported, many states will be hit hard by tariffs on all imported goods.
Enacted tariffs could drive up foreign solar panel prices, pricing out potential customers. Combined with a potential elimination of the solar tax credit, 2025 might be the last year consumers can afford clean energy investments with a deduction on their tax bill.
Home energy summer cost savings
We may just have to wait and see what happens with tax policy as the "One, Big, Beautiful Bill Act" unfolds, which addresses the border, taxes, and energy.
For now, homeowners may save in other ways. Consider these energy efficiency tips.
- Maintain your HVAC. Regularly scheduled maintenance and prompt removal of blockages (like fallen branches, leaves, and debris) may ease the burden on your heating and cooling system by resulting in less runtime.
- Purchase smart appliances. While they often come with a heftier price tag than their non-smart counterparts, a “smart” appliance may let you schedule energy usage around local energy rates, potentially cutting down your monthly bill.
- Look around your interior. Air leaks can occur from old caulk and weather stripping around windows, doors, ceilings, and attics. Timely repairs may save you up to 15% on heating and cooling costs, according to Energy Star.
Finally, check your state’s Department of Revenue website for energy-related tax credits or rebate programs.
For example, California (one of the leading states in solar panel sales) offers a state-level credit of up to $5,000 for qualifying energy-efficient improvements. Other states, like Arizona, have also enacted their version of a solar tax credit.
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