A visitor waves an American flag near the U.S. Capitol, as the U.S. House of Representatives considers U.S. President Donald Trump’s sweeping tax-cut bill, on Capitol Hill in Washington, D.C., U.S., May 19, 2025.
Nathan Howard | Reuters
A tax package House Republicans may pass as soon as this week would kill a slew of consumer tax breaks tied to clean energy, as currently drafted. If it becomes law, households interested in the tax breaks may have to rush to claim them this year, experts said.
Tax breaks on the chopping block include ones for consumers who buy or lease electric vehicles, and others for households that make their homes more energy-efficient.
The Biden-era Inflation Reduction Act, which made historic investments to combat climate change, created or enhanced those tax breaks.
Most would be terminated after 2025, about seven years earlier than under current law.
“Based on the existing proposed language, if you’ve been considering an EV or planning to get one, now is the time to do it,” Alexia Melendez Martineau, senior policy manager at Plug In America, wrote in an e-mail.
Termination of EV tax credits
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Consumers who buy a new EV can claim a tax break worth up to $7,500. One for used EVs is worth up to $4,000. Car dealers can also pass along a $7,500 credit to consumers who lease an electric vehicle.
The House tax proposal would terminate these tax credits after 2025. The Inflation Reduction Act made them available through 2032.
A “special rule” would keep the $7,500 credit in place for some new EVs for an additional year, through 2026. However, it would only be available for new vehicles from automakers that haven’t yet sold 200,000 EVs. That would disqualify EVs from companies like General Motors (GM), Tesla (TSLA) and Toyota (TM).
About 7.5% of all new-vehicle sales in the first quarter of 2025 were EVs, an increase from 7% a year earlier, according to Cox Automotive. Tax credits for EVs have been available in some form since 2008, when George W. Bush approved them.
The Inflation Reduction Act made it easier for consumers to access the EV credit, by allowing dealers to issue the tax break to consumers upfront at the point of sale instead of waiting until tax season. Consumers who buy an EV in the near term would be wise to pick this option, experts said.
“We recommend taking the upfront rebate at the dealership, as it reduces the price you pay now and shifts liability to the dealer to manage getting the credit from the IRS,” Martineau said.
Axing home efficiency tax credits
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House Republicans also aim to axe various tax breaks tied to making existing homes more energy-efficient.
These breaks defray the cost of projects like installing insulation, solar panels, heat pumps, and installing energy-efficient windows and doors, for example.
One — the energy efficient home improvement credit, also known as the 25C credit — is worth up to 30% of the cost of a qualifying project. Taxpayers can claim up to $3,200 per year on their tax returns, with the overall dollar amount tied to specific projects.
Another — the residential clean energy credit, or the 25D credit — is also worth 30% of qualifying project costs. It doesn’t have an annual or lifetime dollar, except for certain limits on fuel cells, according to the IRS.
They are currently available through 2032. (The 25D credit phases down to 26% for installations in 2033 and 22% for those in 2034.)
Both tax credits would be repealed after 2025 under the House bill.
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The 25C and 25D credits have been available in some form since 1978 and 2005, respectively, according to economists at the Haas Energy Institute at the University of California, Berkeley.
More than 3.4 million U.S. households claimed one of the credits in 2023, receiving more than $8 billion, according to the Treasury Department.
Experts recommend that consumers considering a home-efficiency project have it completed by year’s end to be able to claim a tax credit.
“If a homeowner was looking to take advantage of the 25C tax credit, under what is being proposed [by the House] they’d need to ensure their system was put in service this year,” said Kara Saul Rinaldi, president and CEO of AnnDyl Policy Group, an energy and environmental policy strategy firm.
The House tax bill may change
Republicans are eyeing the climate tax breaks as a way to raise money for a sprawling package that also extends measures from President Trump’s 2017 tax law and cuts taxes on overtime and tips, for example.
The House tax plan’s repeal or modification of clean energy credits — including those for EVs and home efficiency — would raise $707 billion over a decade, according to an analysis published Monday by the Penn Wharton Budget Model.
As drafted, the overall House bill would raise the U.S. deficit by a net $3.3 trillion over a decade, after accounting for spending cuts, Penn Wharton said.
Of course, the tax bill’s text may change.
There appears to be dissent from within House Republican ranks over various aspects of the bill. Some of the infighting is tied to the repeal of climate related tax breaks, which have been more popular among consumers than anticipated.
The Senate also needs to pass the measure before it heads to the president’s desk.
“Republicans are far from united, with deficit hawks pushing for greater deficit reduction, centrists objecting to steep welfare cuts and blue-state Republicans fighting for bigger State and Local Tax (SALT) exemptions,” Paul Ashworth, chief North America economist at Capital Economics, wrote in a research note on Tuesday.
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