Renewable Energy Credits in the Tax Bill: Phase-Outs and Survivors

The One Big Beautiful Bill Act, signed by President Trump on July 4, 2025, accelerated the end of most renewable energy tax credits created or expanded by the 2022 Inflation Reduction Act. Homeowner credits for solar, insulation, and heat pumps ended December 31, 2025. Electric vehicle credits ended September 30, 2025. Utility-scale solar and wind face a placed-in-service cutoff of December 31, 2027, unless construction begins by July 4, 2026. Carbon capture, nuclear, geothermal, hydropower, and energy storage kept their credits, and in some cases got better terms. The Joint Committee on Taxation projects the changes will cut federal energy tax spending by about $496 billion through 2034.¹

Home Energy Credits Ended December 31, 2025

Two credits homeowners had been using disappeared at the end of 2025.

The residential clean energy credit under Section 25D covered 30% of the cost of rooftop solar, battery storage, and geothermal heat pumps. It was scheduled under the Inflation Reduction Act to run through 2034. The One Big Beautiful Bill Act terminated it for expenditures made after December 31, 2025.²

The IRS clarified that what matters for this credit is when the original installation is completed, not when the homeowner paid. If you paid a solar installer in 2025 but the system was not finished until 2026, you cannot claim the credit.³

The energy-efficient home improvement credit under Section 25C, worth up to $1,200 a year for insulation, exterior windows, and heat pumps, was terminated for property placed in service after December 31, 2025. It had originally been set to run through 2032.²

Two related credits aimed at builders and commercial property owners survive a bit longer. The Section 45L new energy-efficient home credit and the Section 179D energy-efficient commercial buildings deduction both end for property that is not placed in service by June 30, 2026.³

Electric Vehicle Credits Ended September 30, 2025

The federal tax credits for buying an electric vehicle expired faster than any other clean energy provision. The credits for new clean vehicles (Section 30D), previously owned clean vehicles (Section 25E), and qualified commercial clean vehicles (Section 45W) all ended for vehicles acquired after September 30, 2025.

A vehicle counts as “acquired” on the date a binding written contract is signed and a payment is made, including a nominal down payment or a trade-in. Buyers who met that deadline but did not take delivery until later can still claim the credit when they take possession of the vehicle.³

The Section 30C credit for alternative fuel vehicle refueling property, including home and commercial EV charging equipment, runs slightly longer. The equipment must be placed in service by June 30, 2026.⁴

Utility-Scale Solar and Wind: Two Deadlines to Track

For commercial and utility solar and wind, the technology-neutral clean electricity credits under Section 45Y (production) and Section 48E (investment) had been meant to stay open until national emissions targets were met, with any phase-down beginning no earlier than 2032. That timeline is gone.

Wind and solar facilities are now ineligible for these credits if they are placed in service after December 31, 2027. There is one way around the placed-in-service cutoff: begin construction on or before July 4, 2026. Projects that clear the July 4, 2026 construction-start date are not held to the 2027 placed-in-service deadline, but they must satisfy a continuity requirement and be completed within four calendar years of the year construction began.⁵⁶

Proving construction has begun got harder. Under prior IRS guidance, developers could satisfy the requirement two ways: a physical work test (starting significant physical work) or a five-percent safe harbor (spending 5% of total project cost). On August 15, 2025, the IRS issued Notice 2025-42 eliminating the five-percent safe harbor for wind projects and for solar projects larger than 1.5 megawatts of AC capacity. Those larger projects must now use the physical work test, and planning, permitting, financing, and site clearing do not count as physical work. The change took effect September 2, 2025; projects that had already satisfied the safe harbor under prior guidance were grandfathered.⁷⁸

The notice followed Executive Order 14315, issued July 7, 2025, which directed Treasury to strictly enforce the wind and solar termination and to prevent what the order called “artificial acceleration or manipulation” of construction-start eligibility.⁹

Two more restrictions apply to solar and wind. Facilities structured as leases to homeowners cannot claim the Section 48E credit, though leased solar electric generating property remains eligible. And the Section 45X advanced manufacturing credit no longer applies to wind energy components produced and sold after 2027.⁵⁴

Clean Hydrogen: Window Shortened by Five Years

The Section 45V clean hydrogen production credit was not eliminated, but its runway is much shorter. Projects must now begin construction by the end of 2027 to qualify, down from the original 2032 deadline under the Inflation Reduction Act.¹⁰¹¹

Credits That Were Preserved or Strengthened

Not every clean energy credit was cut. Several were kept intact, and a few improved.

Energy Storage, Geothermal, Hydropower, Nuclear, Fuel Cells

Under the 45Y and 48E credits, energy storage, hydropower, geothermal, nuclear, marine and hydrokinetic energy, and qualified fuel cell property remain eligible for projects beginning construction through 2033. The credit then phases down to 75% in 2034 and 50% in 2035, and disappears for construction starting after 2035.⁴

Carbon Capture

The Section 45Q carbon capture credit was preserved at $85 per metric ton for point-source capture with dedicated geologic storage and $180 per ton for direct air capture. The law also raised the credit for enhanced oil recovery from $60 to $85 per ton, putting it on par with saline storage. The construction-start deadline is still January 1, 2033, and the credit’s transferability was kept.¹²

Existing Nuclear, Plus a Bonus for New Reactors

The Section 45U zero-emission nuclear power production credit for operating plants was left mostly intact. It is exempt from the law’s material assistance and effective control tests for foreign involvement, though entities that themselves qualify as “specified foreign entities” cannot claim it.¹³

The law also created a new 10% bonus credit under Section 45Y for advanced nuclear facilities in “nuclear energy communities” — defined as metropolitan statistical areas that have had at least 0.17% of direct employment tied to nuclear power advancement at any point since 2010. An advanced nuclear facility qualifies if it uses a reactor design approved by the Nuclear Regulatory Commission after 1993 or has received a site-specific construction permit or combined license.¹³

Clean Fuels, With Trade-Offs

The Section 45Z clean fuel production credit was extended two years, through December 31, 2029. The extension came with restrictions. The enhanced credit rate for sustainable aviation fuel is gone; the maximum 45Z credit for SAF is now $1.00 per gallon for fuel produced after December 31, 2025. Feedstocks must be grown or produced in the United States, Canada, or Mexico. Negative emissions rates are barred except for fuels derived from animal manure.¹⁴¹⁵

The Section 40A small agri-biodiesel producer credit was extended through 2026, and its rate was raised to $0.20 per gallon. Producers can now claim both the small agri-biodiesel credit and the 45Z credit for the same gallon of fuel.¹⁴

Domestic Manufacturing

The Section 45X advanced manufacturing production credit for solar panels, batteries, inverters, and critical minerals kept its original 2030 phase-out schedule for most components. Wind components lose eligibility for sales after 2027. Critical mineral production phases out on a new schedule: 75% in 2031, 50% in 2032, 25% in 2033, and zero after that. A new production tax credit for metallurgical coal, at 2.5% of production costs, runs through 2029. And an “integrated component” rule effective for tax years after December 31, 2026 requires that at least 65% of the direct material cost of a component be attributable to U.S.-manufactured inputs when produced at the same facility.¹⁶

Transferability, Direct Pay, and Prevailing Wage Survived

The mechanics that let a wider range of taxpayers use these credits are still in place. Credit transferability under Section 6418 remains available, with the exception that transfers to specified foreign entities are now prohibited for credits under Sections 45Y, 48E, 45Q, 45U, 45X, and 45Z.¹⁷

Direct pay under Section 6417 also survived. Tax-exempt organizations, state and local governments, and other applicable entities can still receive the value of eligible credits as a direct payment from the IRS.⁴

The prevailing wage and apprenticeship rules from the Inflation Reduction Act, which let taxpayers multiply base credit amounts by five when they pay prevailing wages and use registered apprentices, remain in effect. The IRS reaffirmed these standards in updated guidance in March 2026.¹⁸

Foreign Entity Restrictions Cut Across Most Credits

One set of rules touches nearly every credit that was preserved. The law replaced the Inflation Reduction Act’s narrower “foreign entity of concern” language with a broader framework built around “prohibited foreign entities,” “specified foreign entities,” and “foreign-influenced entities,” aimed primarily at ties to China, Russia, North Korea, and Iran.

For credits under Sections 45Y, 48E, and 45X, facilities that begin construction after December 31, 2025 are ineligible if they receive “material assistance” from a prohibited foreign entity. Material assistance is measured as a cost ratio: the share of a project’s direct material costs sourced from non-prohibited entities must exceed thresholds that rise over time. For energy storage, the non-prohibited-entity cost ratio starts at 55% for construction beginning in 2026 and climbs to 75% for construction starting after 2029.² For battery components under Section 45X, the ratio starts at 60% in 2026 and reaches 85% by 2030.¹⁶ Treasury is required to issue implementing guidance on foreign-influenced entities by December 31, 2026.

The law also raised domestic content thresholds for the bonus credit that projects can earn by using U.S.-made components. For generation facilities, the required percentage depends on when construction begins:

Before June 16, 2025: 40% (20% for offshore wind).
June 16, 2025 through December 31, 2025: 45% (27.5% for offshore wind).
During 2026: 50% (35% for offshore wind).
After December 31, 2026: 55% for all facilities.

The law harmonized the domestic content rules for the Section 48E investment credit with those already in place for Section 45Y.¹⁹

A Bill to Reverse Some of the Cuts

In April 2026, Representatives Brian Fitzpatrick of Pennsylvania, Mike Lawler of New York, Max Miller of Ohio, and Mike Carey of Ohio introduced the American Energy Dominance Act, developed with North America’s Building Trades Unions. The bill would restore the Section 179D commercial buildings deduction without an expiration date, extend the 45L new energy-efficient home credit through 2032, push the 45V clean hydrogen construction deadline from 2028 to 2033, and preserve longer-term certainty for the 45Y and 48E credits.²⁰ As of early 2026, analysts described the bill as unlikely to advance in the current Congress, with prospects tied to the outcome of the 2026 midterm elections.²¹

1
Peter G. Peterson Foundation. Energy Tax Policy Under the OBBBA
2
Grant Thornton. Energy Incentives Under OBBBA: What You Need to Know
3
IRS. FAQs for Modifications Under the One Big Beautiful Bill
4
RSM. OBBBA Tax: Clean Energy
5
Arnold & Porter. From IRA to OBBBA: A New Era for Clean Energy Tax Credits
6
IRS. Notice 2025-42
7
McGuireWoods. IRS Notice 2025-42 Limits 5% Safe Harbor
8
Husch Blackwell. Treasury Guidance Tightens Beginning of Construction Standards
9
The White House. Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources
10
Columbia University Center on Global Energy Policy. Assessing the Energy Impacts of the One Big Beautiful Bill Act
11
Tax Foundation. Big Beautiful Bill Green Energy Tax Credit Changes
12
Global CCS Institute. U.S. Preserves and Increases 45Q Credit
13
Morgan Lewis. The Impact of the One Big Beautiful Bill Act on Nuclear Tax Incentives
14
RSM. OBBBA Tax: Clean Fuels
15
IRS. Treasury, IRS Issue Proposed Regulations on the Clean Fuel Production Credit
16
Miller & Chevalier. OBBBA Brings 45X Changes, Though Not Wholesale Repeal
17
McDermott Will & Emery. The One Big Beautiful Bill Act: Navigating Clean Energy Tax Credits in a New Era
18
IRS. Prevailing Wage and Apprenticeship Requirements
19
Beveridge & Diamond. The One Big Beautiful Bill Act Is Very Ugly for Wind and Solar
20
Office of Congressman Brian Fitzpatrick. Fitzpatrick Introduces Energy Tax Credit Bill
21
Utility Dive. Republicans Introduce Bill to Restore Renewable Tax Credits