TL/DR –
Federal clean energy tax credits from the Inflation Reduction Act will expire at the end of the year, following the passage of the Republican-controlled Congress’ One Big Beautiful Bill Act. According to Noah Goldmann, Senior Manager of Campaigns for Rewiring America, consumers can still take advantage of two consumer-facing tax credits – the 25C energy efficiency tax credit and the 25D renewable energy tax credit – until the end of the year. Despite the expiration of these federal credits, Goldmann highlights that many of the upgrades still remain worthwhile due to potential savings on energy costs, and state, utility, and local incentives can offset some of the losses.
Federal Clean Energy Tax Credits on the Verge of Expiry: Here’s What Consumers Should Know
Federal clean energy tax credits, a part of the Inflation Reduction Act, are counting their last days. Lawmakers in a Republican-led Congress passed President Trump’s One Big Beautiful Bill Act, which resulted in an early termination of these tax credits. However, consumers can still reap the benefits of these credits before their official expiry on December 31st.
Noah Goldmann, the Senior Manager of Campaigns for Rewiring America, a non-profit organization dedicated to electrification and clean energy, discussed the remaining options for consumers with Kara Holsopple from the Allegheny Front.
Understanding the Available Tax Credits
According to Goldmann, two types of consumer-facing tax credits are still available until the end of the year. These are the 25C energy efficiency tax credit and the 25D renewable energy tax credit. The focus remains on the types of technologies these credits incentivize. This includes almost every possible upgrade that can reduce a household’s energy costs, improve comfort, and increase resilience.
The list of potential upgrades includes energy-efficient HVAC systems such as heat pumps and heat pump water heaters, insulation, and a new electrical panel. More ambitious projects may even include rooftop solar panels or a geothermal heating installation. However, the time crunch may make these extensive projects more challenging to complete before the deadline.
Preparing for the Deadline
For consumers aiming to take full advantage of these tax credits, Goldmann advises starting as soon as possible. Certain projects, such as rooftop solar installations, may be less feasible due to increasing wait times and the looming end-of-year deadline. However, smaller in-home projects such as insulation upgrades, window replacements, and electrical panel upgrades are still feasible. Goldmann recommends contacting a contractor immediately to ensure project completion before December 31st.
Resources from Rewiring America
Rewiring America offers a comprehensive consumer resource page that includes tools like a contractor finder and an incentive calculator. These tools can help consumers find qualified local contractors and calculate the potential credits from the expiring federal tax credits and additional state and local credits. The page also features a personal electrification planner and a section for frequently asked questions about the tax credits.
Claiming Tax Credits
Goldmann encourages consumers to work with their tax advisors or accountants to file for these tax credits. The process involves filling out a simple form when filing taxes in the following year. In case of an IRS audit, consumers are advised to keep their purchase receipts and proof of installation time for verification.
Income Limitations and Impact on Utility Bills
One important caveat is that these tax credits are non-refundable. This means that they can be claimed only if the consumer has enough federal tax liability to offset. For example, if a consumer has a federal income tax liability of $2,000 and a tax credit of $5,000, they can only claim $2,000 of the credit.
When it comes to the impact on utility bills, Goldmann highlights that energy efficiency upgrades can significantly reduce energy costs and grid demand. For instance, heat pumps are three to five times more efficient than older equipment, potentially saving consumers $1,000 or more on energy bills each year. At the same time, these upgrades can reduce grid demand, which is crucial as more large loads, such as data centers, join grids across the country.
Options After December 31st
After the federal tax credits expire, there are still options available for consumers. Some state, utility, and local incentives can offset some of the costs. Additionally, Goldmann suggests that investments in energy-efficient upgrades can be worthwhile due to the potential savings on utility bills. For instance, Duquesne Light currently offers incentives for heat pumps, heat pump water heaters, and weatherization that can reduce costs by several hundred dollars. Resources such as Rewiring America’s incentives calculator can help consumers understand these options.
Tax Credits for Small Businesses and Nonprofits
Small businesses and nonprofits, including schools and houses of worship, can benefit from a different set of tax credits for rooftop solar installations. These credits are set to expire in a few years, providing an opportunity for these organizations to reduce their utility costs.
In 2023, the last year with data on tax credit uptake, over 158,000 households in Pennsylvania used these credits to reduce their utility bills and modernize their homes. Goldmann hopes that as many households as possible will seize this opportunity before time runs out.
—
Read More US Economic News