Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Political changes has a way of bringing uncertainty to big spending decisions. If you’re considering a major energy-related purchase, Biden-era energy tax credits and incentives may be in danger of disappearing.
That’s because the new president will be in the White House this January. On the campaign trail, President-elect Donald Trump was not shy about his stance on the Biden administration’s signature energy bill, Inflation Reduction Law, calling it the “New Green Scam” and promising to abolish it.
More than 1.2 million Americans used the Residential Clean Energy Tax Credit in 2023, getting money back when buying things like solar panels, household batteries and solar water heaters. More than 2.3 million U.S. taxpayers claimed the energy-efficient home improvement credit that same year, for things like isolation, air conditioners, home energy audits and heat pumps.
But those credits were extended as part of the IRA, and now that the campaign is over, the question is whether the new Trump administration can or will follow through on its promise to eliminate or significantly reduce those credits — and what that will mean for potentially millions of Americans planning to use them.
We spoke to energy policy experts to get a sense of which home energy incentives are likely to stick, which are likely to disappear, and whether this uncertainty should change the way you think about those big financial decisions.
Could Trump Eliminate Home Energy Tax Credits?
Not a single stroke of the pen on the first day. Most of the current home energy incentives, especially large ones for things like electric vehicles and solar panels, are credits built into the tax codes. Congress must change the tax code. Republicans will control both the Senate and the US House of Representatives, but with very small majorities. Because of this, passing legislation could be difficult.
Republican leaders in Congress are considering a process called budget reconciliation to address the incoming Trump administration’s energy policies. That process has many procedural restrictions, limiting what can actually be included in the resulting legislation, but bypasses Senate rules that would require 60 votes to pass a bill. (Republicans will hold only 53 seats in the Senate in the upcoming Congress.) The IRA was passed in 2022 using the same budget reconciliation process.
As for what might be in that bill, that’s still up in the air. Legislative leaders have also said so, with House Speaker Mike Johnson saying they expect to take a “scalpel” to the IRA instead of a “toddler”. New Senate Majority Leader John Thune said in early December that he did not yet know which programs would be targeted, according to E&E News.
“Congress appropriated funds for the IRA,” he said Sheila Olmsteada Cornell University professor who served as senior energy and environmental economist on the President’s Council of Economic Advisers in 2016 and 2017. “To undo it wholesale would require the work of Congress. (Trump) has both houses, but by a pretty narrow margin, I think it’s an open question.
Here’s what could happen with the biggest consumer-focused incentives.
Electric vehicle tax credits make Teslas and other electrified cars more affordable, but the incoming Trump administration has expressed interest in reducing that incentive. Even Tesla boss Elon Musk, a close Trump supporter, supported the move.
EV Tax Credit: Threatened
President-elect Trump’s transition team stated that they intend to eliminate $7,500 tax credit for electric vehicles.
The president-elect’s closeness to Elon Musk, who owns electric vehicle maker Tesla, is unlikely to influence him to retain credit. Musk said in July that removing the subsidies “would only help Tesla.”
If the federal government eliminates the tax credit, at least one state could make up for it. California Governor Gavin Newsom said the state could reinstate your EV rebate if the loan disappears. “We will intervene if the Trump administration eliminates the federal tax credit, doubling down on our commitment to clean air and green jobs in California,” Newsom said in a statement in November.
Potential policy changes affecting electric vehicles go beyond just the tax credit, Olmsted said. The administration could weaken fuel efficiency standards for vehicles, known as CAFE standards. “What’s driving a significant portion of EV demand is those CAFE standards,” she said.
Solar Tax Credit: Uncertain
The single biggest incentive for American homeowners to get solar panels is residential clean energy creditwhich the IRA extended and extended. It currently provides a 30% tax credit on the cost of installing solar panels (along with batteries, geothermal heat pumps and a several other clean energy products) until 2032, when it starts to die down. It predated the IRA as the Investment Tax Credit, or ITC, which was created by the Energy Policy Act of 2005, signed by President George W. Bush.
The credits could shrink, experts say, especially as Republicans in Congress look for ways to offset the budgetary impacts of extending broad tax cuts enacted during the first Trump administration. “They’re going to be looking for places to solve that problem,” Olmsted said.
Gilbert Michaudassistant professor of environmental policy at Loyola University Chicago, said he does not expect the credit to be eliminated wholesale.
“While the Trump administration may try to cut them, these programs have received significant support from Congress, the private sector and even the rural communities where the energy projects are being built,” Michaud said. “More broadly, it would be difficult to cut up the entire IRA, and while I think they will try, some of these programs and incentives will remain intact.”
Reductions in the solar tax credit could include earlier withdrawals or stricter requirements, it said Zoe Gastonprincipal analyst for US solar distribution at energy consulting firm Wood Mackenzie. “However, it is too early to predict.”
Changes to the solar tax credit would change the calculus for consumers, who currently count on getting a significant portion of their solar panel investment back when they file their taxes. It can also affect availability solar lease and electricity purchase agreementswhere a third-party company owns the solar panels on your roof and charges you either a lease payment or a fee per kilowatt-hour. The tax credit, which goes to the company, makes that business model more affordable.
Government Solar Incentives: Largely Safe
While Congress might pick up a scalpel or some other item to cut the federal solar tax, it likely won’t have an impact on state programs like net meteringin which you are paid for excess electricity that you sell back to the grid.
“It’s also important to remember that state and local renewable energy programs are largely shielded from federal intervention or overreach,” Michaud said. “Efforts such as state net metering programs, renewable portfolio standards, and rebate and loan programs will remain with the change in DC, especially in bluer states.”
If the federal government limits incentives for renewables and energy efficiency, states could pick up some of the slack, Olmsted said. Especially larger, more democratic countries such as California and New York.
Read more: How solar-friendly is your country?
Tax credits for home energy efficiency: Uncertain
Another component of the IRA was a set of tax credits aimed at home energy efficiency. Under the Residential Clean Energy Credit, this includes unlimited 30% tax credits for geothermal heat pumps and solar water heaters. Under the Special Energy Efficient Home Improvement Credit, it includes tax credits for things like efficient air conditioners, furnaces, water heaters, heat pumps, insulation, electrical system upgrades and more, all of which have limits on how much money you can borrow. return each one.
Any changes to these credits would face the same hurdles as changes to the solar tax credit: Congress would have to do it.
A more likely outcome is that the Trump administration will roll back the efficiency standards appliances and lightingMichaud said.
The situation is also different for State-administered home energy efficiency rebate programswhich provide additional financial assistance in addition to federal tax credits. Those programs are run by states using money distributed by the federal government, and the new administration could decide not to distribute money that hasn’t already been spent.
“If the money is already out, I think those programs will continue to be spent,” Olmsted said. “If not, anything could happen.”
Current tax credits and rebates reduce the cost of installing energy efficient appliances such as a heat pump water heater.
Should you rush to buy energy for your home in case the tax credits disappear?
The practical effect of tax credits potentially worth thousands of dollars that have an uncertain future is that people may be tempted to rush to buy to take advantage while they can.
Keep in mind that anything that would qualify for a tax credit is a fairly large purchase, whether it’s solar panels, a new HVAC system, a new water heater, or a new electric vehicle. These decisions should not be taken lightly.
“Regardless of politics, I always suggest that people invest in energy if they feel the time is right for them,” Michaud said.
If Congress acts on these tax credits in 2025, that change could affect the 2025 tax year, which means you should be careful assuming you’ll get money back in the form of a tax credit for purchases made starting in January. Factor that into your budget considerations.
“While it’s important to pay attention to potential policy changes, I wouldn’t necessarily recommend that people just make energy investment decisions out of fear of losing tax credits,” Michaud said. “People should consider.” electricity costsbudget and other traditional factors when considering solar, storage, EVs and the like.”
